LDN - Business

Scottish whisky makers reel over U.S. tariffs in row over EU subsidies

[October 03, 2019] By Kate Holton

LONDON (Reuters) - Scottish whisky makers said on Thursday jobs and investment were at risk after the United States slapped a 25% tariff on their single malt spirit and France said the European Union could respond in the row over EU aircraft subsidies.

The World Trade Organization gave the United States a green light to impose tariffs on $7.5 billion worth of EU goods annually in the long-running case, a move that threatens to ignite a tit-for-tat transatlantic trade war.

"If the American administration rejects the hand that has been held out by France and the European Union, we are preparing ourselves to react with sanctions," French Finance Minister Bruno Le Maire said on Thursday.

Washington said that, after 15 years of litigation, it would impose 10% tariffs on European-made Airbus <AIR.PA> planes and 25% duties on French wine, Scotch and Irish whiskies, and cheese from across the continent.

The measures would follow tariffs levied by the United States and China on hundreds of billions of dollars of each other's goods in their more than year-old trade war, which has dampened the outlook for the global economy.

"The tariff will put our competitiveness and Scotch Whisky’s market share at risk," Scotch Whisky Association Chief Executive Karen Betts said in a statement, adding that it would hurt investment and job creation in the industry.

The association, which called for restraint from all sides, said single-malt whisky represented over half of the total value of British products on the U.S. tariff list, amounting to over $460 million, even though the row was over aircraft subsidies.

U.S. WARNING

The tariffs heavily target products from the four countries in the consortium of European planemaker Airbus <AIR.PA>, including Spanish olives, British sweaters and woollens, and German tools and coffee, as well as British whisky and French wine.

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French Finance Minister Bruno Le Maire attends a joint news conference after a meeting in Paris, France, September 19, 2019. REUTERS/Gonzalo Fuentes

Cheese from nearly every EU country will also be hit with the 25% tariffs, but Italian wine and olive oil were spared, along with European chocolate.

Shares in European luxury goods, including British fashion brand Burberry <BRBY.L>, and drinks companies, such as France's Remy Cointreau <RCOP.PA>, rose on Thursday, after the tariffs excluded cognac, champagne and leather goods.

The size and scope of the tariffs were reduced considerably from a $25 billion list floated by Washington this year that included helicopters, major aircraft components, seafood, luxury goods and other categories excluded from Wednesday's announcement.

One person familiar with the case said the U.S. Trade Representative (USTR) was deliberately not using the full extent of WTO-approved retaliation to coax the European Union into negotiations.

But the USTR also issued a warning. "The U.S. has the authority to increase the tariffs at any time, or change the products affected. USTR will continually re-evaluate these tariffs based on our discussions with the EU," USTR said.

Airbus and U.S. firm Boeing <BA.N>, the world's two largest planemakers, have waged a war of attrition over subsidies at the WTO since 2004, in a dispute that has tested the trade policeman's influence and is expected to set the tone for competition from would-be rivals from China.

(Additional reporting by Tim Hepher, Julien Ponthus, Joice Alves and Danilo Masoni in London, Philip Blenkinsop in Brussels and David Shepardson in Washington; Writing by Edmund Blair; Editing by Jon Boyle

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