On Jun 20, the European Union (EU) announced that starting Jun 22, import tariffs of 2.8 billion euros or more than $3.2 billion will be levied on a variety of American products. The “tit-for-tat” levies came into action after the United States slapped tariffs of 25% on steel imports and 10% on aluminum imports from EU countries.
Trump signed the tariff plan into law on Mar 8, levying charges on steel and aluminum imports from other countries. Trump’s metal tariffs initially exempted neighbors Canada and Mexico, and the EU. But, on Jun 1, when the United States levied metal tariffs on the EU, citing “national security,” the EU did not shy away from taking such "rebalancing measures.”
New Set of EU Tariffs Fan Trade War Fears
On Jun 20, the European Commission said that a tariff of at least $3.2 billion will be imposed on imports starting this Friday (Jun 22). Earlier in June, when the United States imposed steel and aluminum tariffs on the EU, the economic bloc gave enough hints of strong retaliation to this action. In fact, Maroš Šefcovic, Vice-President of the European Commission reportedly called the U.S. tariff decision “unilateral and illegal.”
After Wednesday’s decision to charge import tariffs of 25% on different U.S. goods, Cecilia Malmström, trade commissioner of the EU, said that the rules of global trade “cannot be violated without a reaction” from the EU. She added that the EU’s response to Trump administration import duties is “measured, proportionate and fully in line with WTO rules." Malmström also said that if “U.S. removes its tariffs,” the EU will follow suit.
According to Export.gov, an International Trade Administration initiative, the EU’s average tariff charged on American products is 3%. However, after Jun 22, an import tax of a whopping 25% will be charged on all these products. Additionally, the EU threatened to levy tariff of further 3.6 billion euros or around $4.2 billion “in three years' time” or before provided something positive comes up in the “WTO dispute settlement.”
Stocks at the Receiving End of EU Tariffs
The EU decided to levy tariffs on U.S. goods after President Trump threatened a fresh set of tariffs of $450 billion on goods imported from China. The ongoing trade war between the United States with China and now the EU is clearly a sign of worry for global trade.
In fact, a wide variety of American product types, including agricultural products like bourbon whiskey and peanut butter, steel giants and jeans companies will be impacted by this new set of EU import tariffs. Bourbon whiskey companies like Elijah Craig and Blanton’s, and The J. M. Smucker (SJM - Free Report) , one of the key players in peanut butter industry will bear the trouble.
Moreover, trade tensions between Washington and Brussels might be affecting motor-bike manufacturer, Harley-Davidson (HOG - Free Report) . European auto-giants like Daimler (DDAIF - Free Report) , BMW BMWYY and Volkswagen (VLKAY - Free Report) will also suffer as some of their biggest production plants are in the United States. Negotiations are underway to abolish auto tariffs between the United States and the EU.
Other companies to be affected by the new EU tariffs are jeans company Levi Strauss and steel manufacturers, United States Steel (X - Free Report) and Steel Dynamics (STLD - Free Report) . While United States Steel has a Zacks Rank #3 (Hold), Steel Dynamics holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Undoubtedly, the EU tariff announcement has added to the already intensifying trade war. The EU is gearing up to levy import tariffs on a number of American goods including motorbikes, jeans, bourbon whiskey and peanut butter. The U.S.-China trade war and rising tariff-related tensions between the United States and the European Union are expected to dampen investor sentiment in the days to come.
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