US trade sanctions on European Union (Section 301) and their effect on Spanish economy

After years of dispute, the World Trade Organization (WTO) authorized on October 2 the imposition by the United States (US) of tariffs on products of the European Union (EU) valued at 7.5 billion dollars. The objective is to compensate for the economic loss that the US has suffered due to the help given to Airbus for the launch of certain models and the granting of credits that the governments of France, Germany, United Kingdom and Spain, provided with interests below that available in the market. Giving it a comparative advantage over its American counterpart, Boeing.

 

According to the US Department of Foreign Trade, as of tomorrow, October 18, a 10% tariff on Airbus airplanes and a 25% tariff will be implemented on an extensive group of EU products, such as olive oil, wine, whiskey, cheeses, fruits, sausages, knitwear…

 

Consequently, Spanish exports to the United States of olive oil, olives and wine could suffer an annual increase of 25% on their export value from October 18 onwards. According to the Institute of Foreign Trade (ICEX), exports of these products were valued at 700 million euros in 2018, compared to a total of Spanish exports to the USA of 12,791 million euros. The impact on these sectors of the Spanish economy would therefore be approximately 175 million annual euros if the same level of annual exports were maintained.

 

In addition, the European Union has also had a lawsuit with the WTO for many years now, against the USA for the help that they had been granting Boeing to the detriment of Airbus. The resolution to this lawsuit will be published during the second half of the year 2020. It is very likely that at that time, the US and the EU negotiate an agreement to aid both companies in order to avoid the imposition of new tariffs, as well as eliminating those related to this note and therefore avoiding a staggered trade war between the two blocks.