By Yuka Hayashi 

WASHINGTON -- The Trump administration said it will target more French and German wine and spirits with 25% tariffs starting Jan. 12, in the latest escalation in a tit-for-tat tariff fight related to a longstanding dispute over commercial-jetliner subsidies.

Among the new levies, the U.S. will for the first time apply the 25% levies on wines from France and Germany that exceed 14% alcohol, which had previously been exempt, according to the Office of the U.S. Trade Representative.

The U.S. had seen a surge in these higher-alcohol wines, typically from Spain and France, after wines with 14% alcohol or less were hit with tariffs in October 2019.

"With particularly what's happening in light of the pandemic, with restaurants closures and distillery closures, this just is not the right time to be hitting an industry that's already dealing with the economic impact," Christine LoCascio, chief of public policy for the Distilled Spirits Council of the U.S., said Thursday.

Washington imposed 25% tariffs on wine from France, Spain, Germany and the U.K. in October 2019 in retaliation for subsidies they made to the European aircraft manufacturer Airbus SE, arguing they hurt Boeing Co.

Other items that will be subject to new tariffs are premium cognacs that cost $38 per liter and higher, and some aircraft manufacturing parts, both from France and Germany. High-alcohol wine from Spain and the U.K. weren't added to the latest list.

The USTR said in a regulatory filing that the additional tariffs target products from France and Germany because the two countries have provided the greatest levels of subsidies inconsistent with WTO rules.

The U.S. and the EU have been in a long-running dispute over what each claim are unfair government subsidies to commercial-aircraft manufacturers: Airbus in Europe and Boeing in the U.S.

The battle has played out recently in tit-for-tat tariffs on consumer products.

In October 2019, the U.S. slapped tariffs on products worth $7.5 billion on wine, cheese and other products from Europe. In retaliation, the EU announced last month tariffs on U.S. products worth $4 billion, including Boeing jets, spirits nuts and tobacco.

The USTR said Wednesday in a press release that the latest addition to its tariff list comes as the U.S. makes adjustments after the two sides used different reference periods for trade data to determine products to be covered by the tariffs.

The USTR said that while the U.S. used data for the prior calendar year, the EU used a period during which commerce was drastically reduced because of the Covid-19 pandemic.

That allowed Europe to impose tariffs on "substantially more products" than it would have been able to under the calendar-year method, the USTR said. After the EU refused to change its approach, the USTR said it decided to change its own reference period and add more products. The addition won't change the total $7.5 billion value of the products affected by the tariffs, the USTR said.

An EU spokesman said the choice of the reference period for the EU's tariff measures was based on the most recent available trade data in line with a long-standing WTO practice. The spokesman said Washington "unilaterally disrupts" the ongoing bilateral negotiation to find a settlement to the aircraft disputes.

"The EU will engage with the new U.S. administration at the earliest possible moment to continue these negotiations and find a lasting solution to the dispute," he said.

The escalation in the tariff fight highlights the challenges in the trade relationship between the U.S. and the EU, even as European officials call for improving ties under the incoming administration. Digital taxes imposed on U.S. tech companies by France have become a significant cause of tension. The EU's signing of an investment agreement with China this week has drawn concern among U.S. trade officials as they seek European cooperation in countering China.

The impact of tariffs has been significant. Imports of wine from France fell 54% during the first five months of this year from a year earlier, while those from Germany dropped 42%, according to the US Wine Trade Alliance.

"These tariffs devastate U.S. restaurants and small businesses at the worst possible time," Ben Aneff, president of the group. "It underscores how important it will be for President-elect Biden to quickly repeal the restaurant tariffs, and find ways to more effectively influence the EU while doing less damage to businesses here at home."

Write to Yuka Hayashi at yuka.hayashi@wsj.com

 

(END) Dow Jones Newswires

December 31, 2020 17:29 ET (22:29 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.