E.U. threatens to retaliate against U.S. agricultural tariffs

The E.U. is threatening to impose tariffs on agricultural and other products from the U.S. in retaliation to similar plans by the U.S. hanse data show that the E.U. represents an important destination for key U.S. agricultural products but they remain small in overall U.S. exports.

The E.U. on 17 April published a list of potential U.S. products targeted for tariffs. The list comprises 389 products in the Harmonised System at 8 digits ranging from agricultural products to helicopters and video game consoles. According to Bloomberg about US$12 billion in products are covered. The agricultural products comprising alcoholic beverages and tobacco represent more than wo thirds in value terms of those targeted products. In 2017, the E.U. represented 15.8 percent of U.S. exports of the targeted agricultural products down from 18.0 percent in 2007. In 2017, Canada was the most important destination with 20.4 percent of exports in the targeted agricultural products going to Canada, followed by 8.4 percent to Mexico, 6.7 percent to Japan and 5.3 percent to China.

The U.S. exported in 2017 about US$8.7 billion of the targeted agricultural products representing 3.1 percent of total U.S. exports to the E.U. The agricultural sectors made in 2017 3.6 percent of U.S. exports overall.

The E.U. has remained the dominant destination in several of the targeted U.S. agricultural exports comprising manioc, sunflower seeds, vanilla, ethyl alcohol, vermouth and other wines, fish fillets, wine, vegetable waxes and fats (Figure 1). In 2017, in the 10 largest sector by share, the E.U. took 41.7 percent of the select U.S. agricultural exports.

Figure 1. U.S. top agricultural exports to E.U.

The E.U. threatened retaliation by targeting a relatively small set of U.S. products but where the E.U. constitutes an important to dominant export destination. While the U.S. may not find it too difficult to compensate exporters given the relatively small size of the export sectors, it illustrates the interconnectedness between the U.S. and E.U. This represents a most valuable feature of international trade relations.