The Econ-versation: New tariffs on European goods

Silvia Buonocore, Senior Writer

On Oct. 18, tariffs on European goods – including aircrafts, olive oil, dairy products, beverages and more – went into effect. Tariffs are taxes that increase the prices of foreign goods (in this case, European goods), so U.S. companies are encouraged to consume more domestic goods, supporting the domestic economy.

These tariffs constitute a 10 percent increase in aircraft and a 25 percent increase in other goods; both will affect up to $7.5 billion European exports each year. The Office of the U.S. Trade Representative created a detailed list of all the newly tariffed items.

The World Trade Organization (WTO), which mitigates trade issues between countries, granted the United States permission to enact these tariffs in early October. The ruling came after 15 years of dispute concerning illegal European subsidies to Airbus, a European aerospace company.

The European subsidies – grants of money from the government – were given to Airbus, allowing them to keep prices low to remain competitive in the overall market. This advantage caused losses to the American aerospace industry. Therefore, the tariffs are intended to make up for the losses until the United States and Europe reach a different agreement.

The tariffs mostly target exports from France, Germany, Spain, and the United Kingdom because they are considered the most responsible for the subsidies to Airbus. For instance, alcohol, fruit, cheese, and tools from Germany and sweaters, pajamas and blankets from the United Kingdom.

While the tariffs are intended to recuperate losses incurred by the American aerospace industry, some believe they have the potential to hurt both Europe and America as they may increase trade tensions increase, rather than welcome negotiation.

This information originally appeared in The New York Times and USA Today.

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