Trump raises duties on EU products “to 25%. Cars and everything else”. And agribusiness trembles

“We have decided, and soon we will announce duties of 25% (on products made in the EU, ed.), in general, on cars, but also on all other things”: words of U.S. President Donald Trump, who, yesterday, in the first cabinet meeting of his second term in the White House, “reinforced” the promises on the issue launched in the election campaign, eliciting the immediate EU response which, in the voice of Commission Vice President Stéphane Séjourné, said that “Europe will react immediately and firmly. Tomorrow we will be on our way to India, with the aim of diversifying our partnerships. Obstacles to fair trade are unjustified, especially between trading partners. It is a situation where everyone loses: American companies, European companies and consumers”.
Except because the interchange of goods between the U.S. and the EU is estimated at 1.5 trillion euros, moving on an axis worth 30% of global trade in goods and services, and 43% of world GDP, according to European Council estimates. It is yet to be understood if the duties will really arrive and when, but the alert now rises more than ever, even for Italian wine, which, in the U.S., exports around 2 billion euros, a quarter of its total, and for all agribusiness, which sees in the U.S. its first non-EU market, with 7.8 billion euros out of 69 of total exports (Coldiretti elaborations on Istat data).
Moreover, in an already difficult U.S. economic context, with wine consumption in general decline, although Italian wine imports are expected to grow significantly in 2024. As Trump made clear, in the crosshairs will be the EU auto industry, a key economic engine of the European Union, but it is difficult to think that European agribusiness will get away with it. “They (the EU, ed.) don’t accept our cars, they essentially don’t accept the products of our agriculture, while we accept all this from them. I love all European countries, but the E.U. was formed to cheat the U.S., and they did a good job, but now I’m president”, Trump said bluntly.
In the first wave of tariffs in Trump’s previous term (at the time motivated by the dispute between Airbus and Boeing), Italian wine was saved, while French production was substantially the most directly damaged. But now it is difficult to know whether there will be differences in treatment between different EU countries, which seems unlikely given Trump’s words. And in any case, as pointed out by Italian Foreign Minister Antonio Tajani, “the answers on the issues of duties are at the European level, and we will talk about it at the European level, we will dialogue and we will try to find the best possible solutions to protect our interests in a transatlantic relationship that must not deteriorate, but we have to protect our interests and our companies and find solutions that allow our realities to be competitive. We have a strategy. We have already been working for months on the issue of duties and we are moving forward, without agitation, but with determination and strength to protect our businesses. The government is determined”.
So far, from the trade organizations of Italian agriculture and wine, few official comments, although, in recent days, at the “Stati Generali del Vino” in Rome, the major representations of the supply chain had expressed more than one concern (here our interview with Albiera Antinori for Federvini, Lamberto Frescobaldi for Unione Italiana Vini - Uiv, and Luca Rigotti of Gruppo Vino Confcooperative). Today we stand at the window, waiting to understand in more detail what products, if any, and to what extent, Trump will want to target.
Although launching a new estimate is Coldiretti, according to which “a 25% tariff on made-in-Italy agri-food exports to the U.S. could cost U.S. consumers up to 2 billion euros more, with a definite drop in sales, as also demonstrated by the previous experience in Trump’s first term. If the duties were to affect the entire agri-food sector, the estimated cost to individual supply chains would be almost 500 million for wine alone, 240 million for olive oil, 170 million for pasta, 120 million for cheese”, Coldiretti argues. According to whose analysis (based on Istat data), the duties imposed in the first Trump presidency “on a number of Italian agri-food products led to a decrease in the value of exports (annual comparison between 2019 and 2020) that ranged from -15% for fruit, to -28% for meats and processed fish products, passing through -19% for cheeses and jams and -20% for liquors. But wine, although not initially affected by the measures, had also set back 6%”. “The imposition of duties on our exports would obviously open up a worrying scenario, all the more so considering the importance that the U.S. market has for our agrifood production and not only”, notes Coldiretti President Ettore Prandini. “In the U.S., Italian agrifood has grown in value by 17 percent against a 3.6% drop in general exports, confirming once again that Italian food is a symbol of the country’s economy. This is why we believe that all necessary diplomatic actions must be put in place to avert a trade war that would harm European and American citizens and businesses”. Moreover, it remains to be seen what the European Union’s retaliation to the possible imposition of U.S. duties might be. Europe had responded to the move by the first Trump presidency - Coldiretti recalls - by placing additional tariffs of 25% on a number of iconic made-in-U.S. agri-food products such as ketchup, cheddar cheese, peanuts, cotton, and U.S. potatoes, as well as salmon, walnuts, grapefruits, vanilla, wheat, tobacco, cocoa, chocolate, citrus juices, and liquors such as vodka and rum.
Making a first possible estimate of the impact for wine, in recent days, was Unione Italiana Vini, headed by Lamberto Frescobaldi, according to which, with duties assumed at 20% on still wines and 10% for sparkling wines, the dry loss for Italian wine would be around 330 million euros, with an estimated drop of 15%, based on the French experience that occurred between mid-2020 and the first quarter of 2021, when, faced with duties loaded at 25% (like those promised today by Trump, in general) the market response on marketed volumes was directly proportional (-24%).
A complex picture, requiring caution and cool heads, but, nonetheless, alarming, in a period, now also quite long, of major difficulties for the wine market. With duties on EU products (which account for the bulk of the more than 30% of foreign wine that is consumed and sold in the U.S.) in the world’s leading wine market, which would have heavy consequences that would be difficult to recover from, as they know well in France, which has already suffered them between 2019 and 2021, and where a supply chain, already in great crisis, is preparing for a shock wave, which, we hope, will not come. With some faint hope, at least on the purely oenological front, coming from the words of Mirella Menglide (Ice New York), according to whom, among importers and buyers, there would be no great rush to stockpile to cope with possible duties. The risk of which, however, has become much more concrete in a few hours.