The Government has come up short in its efforts to convince the European Commission not to target US bourbon, Boeing aircraft and agricultural produce in potential retaliatory tariffs.
The views of other governments in the European Union (EU) have begun to harden, after US president Donald Trump threatened to raise blanket tariffs on trade - which are taxes on imports - coming from the EU to 30 per cent from August 1st.
The commission, which has been leading the tariff negotiations for the EU, is stepping up a fall-back plan in case talks with the Trump administration to head off those higher US tariffs fail.
The EU executive has finalised a package of retaliatory tariffs that would hit €72 billion worth of US trade, should negotiators fail to agree a deal.
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The final list of products includes US-made cars, aircraft, bourbon, chemical products, medical devices, electrical equipment and agricultural produce, such as fruit and vegetables, according to a copy of the list seen by The Irish Times.
The Government had lobbied to spare bourbon, US aircraft and plane parts, medical devices and the agri-food sector from the EU’s retaliatory tariffs.
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Government Buildings was concerned that hitting these US industries and products would have knock-on economic impacts for those sectors in Ireland, or draw even higher tariffs on Irish whiskey and agricultural produce from Mr Trump.
The proposed EU tariffs on the US aviation sector target aircraft manufacturer Boeing, which would be a significant blow to Irish airline Ryanair, which buys all its planes from the aviation giant.
The proposed tariffs on US-made aircraft parts would also impact Ireland’s large aircraft leasing sector.
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The EU will have to have a “very strong response” if the US imposes the 30 per cent tariff, Taoiseach Micheál Martin said.
He told the Dáil on Tuesday that “while the European Union will continue to work for an agreement, it will also continue to prepare for other outcomes”.
Mr Martin said a 30 per cent tariff is “untenable and sustainable” and would have to be met with a “very strong response from the European Union which would have the effect of creating a reaction in the markets in my view which utterly would create an economic crisis in itself”.
He said the EU-US trade is the biggest in the world and he hoped a negotiated settlement could be reached. He pointed to the range of analyses by Economic and Social Research Institute (ESRI) which predicted a 10 per cent tariff rate would see a decline in economic growth and “an ease in employment creation”.
At 30 per cent there would be economic decline and job cuts. “It’s a very serious situation,” he said.
Other US products the EU plans to levy import taxes on in the event the transatlantic dispute escalates into a trade war include tractors, jukeboxes, fish, beauty products, steel and aluminium, children’s toys and cigarette lighters.
The planned retaliation would also include export controls restricting the sale of scrap metals to the US.
The commission had proposed hitting up to €95 billion worth of US trade, but the size of the package of counter-tariffs was pared back to €72 billion on foot of national governments’ submissions to remove certain products and sectors.
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The commission did remove US thoroughbred horses from the batch of proposed tariffs, following lobbying by Ireland. The number of chemical and electrical products the EU proposes to hit with tariffs was also reduced in the revised set of counter-tariffs.
EU trade commissioner Maros Sefcovic said the fresh threats of 30 per cent tariffs on EU goods would “prohibit” future EU-US trade, if those levies came into force next month.
The EU’s package, which still needs to be given the final sign off by national capitals, comes on top of an existing set of counter-tariffs on US soybeans, motorbikes and orange juice, hitting €21 billion worth of trade, which is ready to go live if talks break down.
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Ireland, Italy and France were previously successful in lobbying to have US bourbon, wine and dairy products removed from that first set of proposed counter-tariffs.
“It is not our intention to come forward with any countermeasures before the 1st of August, while negotiations continue”, a commission spokesman said on Tuesday.
Also speaking on Tuesday, Minister of State for European affairs Thomas Byrne said the commission needed a “strong hand” in talks, which meant having counter-tariffs in reserve.
“The American government under president Trump needs to make a decision as to whether they want an agreement,” he said.
EU negotiators are seeking to get talks back on track with their US counterparts after the letter from Mr Trump announcing planned 30 per cent tariffs upturned the negotiations.
Commission officials had been hopeful a trade agreement in principle was nearly ready to be signed last week, pending approval by Mr Trump.
Trade officials from the commission are travelling to Washington for talks with US negotiators, with Mr Sefcovic due to speak to US trade representative Jamieson Greer on the phone later on Tuesday.
European businesses have faced tariffs of 10 per cent since early April, with steel products and cars sold into the US subject to higher levies.
A question mark remains over whether the White House will follow through on separate threats to raise tariffs on imports of pharmaceuticals. Such a move would be a massive blow to Ireland’s economy, given that US pharma companies with manufacturing sites in the Republic account for a huge portion of exports to the US.
