Will the US tariffs lead to a transatlantic trade war?

The US has just announced that it will be imposing new tariffs on European products, which is predicted to be worth around $7.5 billion. It includes tariffs of between 10 and 25% on various products, including French wine, Italian Cheese and Scotch whisky.

However, as trade relations between the EU and the US are already under pressure, there are fears that the move could spark a transatlantic trade war.

And if it does, how will the EU respond?

The WTO verdict allowed the US administration to impose tariffs in retaliation for EU subsidies on Airbus. On Twitter, Donald Trump described this as a “nice victory”, adding that “the European Union has for many years treated the USA very badly on trade due to tariffs, trade barriers, and more.”

However, the WTO verdict found that, as well as Airbus being subsidised, the American competition Boeing had also received large subsidies totalling billions of dollars. In light of this, it’s expected that the EU will win permission to impose tariffs of its own by next year.

The outgoing EU Trade Commissioner said in a statement: “The mutual imposition of countermeasures, however, would only inflict damage on businesses and citizens on both sides of the Atlantic, and harm global trade and the broader aviation industry at a sensitive time.”

So, will this cause any harm? And if so, how significant will it be?

It’s estimated that the US tariffs will put 1 billion euros of Spanish products, 500 million euros of Italian products, and 1 billion euros of Scottish whiskey exports at risk every year. Plus, US consumers will be expected to pay more for European products.

And if the EU decides to impose more counter-tariffs, this could also impact US businesses and European consumers. However, at this stage it’s still unclear what the total impact will be from the changes and if it will escalate to a trade war.