Protectionism: An Absurd Punishment

Trump’s tariffs on Spanish agri-food products seek to weaken Europe’s negotiating position

The trade war initiated by Donald Trump in response to China has reached Europe via the agri-food industry. For Spanish agricultural products, namely cheese, olive oil, ham, oranges and olives, the decision taken by the World Trade Organization to support the implementation of tariffs on European products (as supposed compensation for the public subsidies given to Airbus) means a considerable loss of the American market. Exporters calculate they will lose around 12% of U.S. sales of the products cited above.

As it has been said many times, the answer has to be European. Trump’s imposition of import tariffs looks to inflict disproportionate punishment, since U.S. producers are not competing directly with Spain, and tariffs will contribute toward weakening Europe’s position in other important negotiations. The problem is that Europe cannot respond to Washington’s unjustified decisions by escalating retaliation. Negotiators in Brussels and Europe should be aware that when the Trump administration strikes the commercial sector, this is often accompanied by efforts to disrupt uniform action by EU States. There have been suggestions that tariffs could be forgiven with respect to some countries or deferred with respect to others within same economic zone. This has happened with Spain, which already pays a 25% import tax on the products affected, and in Italy, which is being courted by possible revisions to the list of products subject to the tariffs.

The question remains the same as it was in 2018: Does the European Union have an economic and diplomatic strategy in response to U.S. protectionism? It would appear not. The next question is whether the eurozone can agree on a single response, one which has the support of all member countries. The probable answer continues to be no. But national responses are not enough. It’s possible that increasing exports with higher added value would be an excellent strategy for Spain’s foreign trade; but it’s unrealistic to suppose that this goal can be realized over the next few years.

There is also opportunity to counterattack. The WTO still has to rule on the aid supplied to Boeing by Washington. So, if the WTO authorizes tariff compensation for those subsidies, that will be the moment to propose a general truce which would mean the end of U.S. commercial aggression toward the eurozone. Trump’s rhetoric casting Brussels’ negotiations as unfair is nothing more than a crude excuse to gain economic advantage from a “like it or lump it” commercial situation.