The trade war just moved to a new front, with the White House now targeting the European Union in its push to balance deficits.
Following a landmark World Trade Organization (WTO) ruling, the White House is planning to apply tariffs on $7.5 billion worth of European imports.
This could have implications for investors, especially those who have holdings in European stocks.
WTO Says Tariffs Would Be a Legal Form of Retaliation
President Trump suggested applying tariffs on European goods in 2018, although the idea was put on hold following high profile meetings with officials from both sides. Now a new ruling from the WTO has given the administration a reason to push ahead.
The WTO ruled that European governments gave illegal financial aid to Airbus SE (FR: AIR), unfairly favoring the aerospace company over American rival Boeing Co. (NYSE: BA). This created unbalanced competition in the international market and was found to be in breach of WTO guidelines and existing agreements.
This sees the end of a 15-year diplomatic and legal battle, with the U.S. clearly coming out on top. The WTO announced that America can now retaliate with tariffs to offset the damage caused.
The White House will push ahead with a 10% import tax on aircraft produced in Europe, as well as a 25% tariff on consumer goods. This will impact everything from imported cheese and wine to malt whisky.
Impact on Investors, Consumers, and Producers
Airbus stock fell -2.04% on Wednesday following the news. It is still up 36.21% year to date, thanks to impressive sales figures and a knock-on benefit from Boeing’s safety scandal.
Stocks overall were down on Wednesday. News of fresh tariffs for a new market left investors worried about consumer prices. Wall Street had its worst day in six weeks. The threat of a dual front trade war with China and the European Union could reach deep into investor decisions this week.
Consumers will see higher prices for European products, but this is not expected to have a huge impact on GDP. U.S. airlines that maintain Airbus fleets will also feel the impact of tariffs.
American producers could eventually feel pressure from this move. The European Union has vowed to implement its own tariffs, saying that Trump’s decision will “be pushing the EU into a situation where we will have no other option than to do the same.”
Investors are advised to consider their positions in all stocks, taking note of the fundamentals and future projections before making reactionary decisions.
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