The European Union and the United States are the world’s largest partners in trade and investment. Now, the tariffs announced by the Trump Administration could be a serious threat to the European fashion business in the country.
An imaginary wall rises in the middle of the Atlantic Ocean. Since Donald Trump was elected presidency of the United States in 2016, trade relations between the European Union (EU) and the largest economy of the world have been increasingly strained. From the paralysis of the TTIP, to the first threats, and, finally, a new round of tariffs that could take effect in the coming months, fashion holds its breath because of a trade war in which there are 15,000 million euros at stake for the sector.
The European Union and the United States are the world’s largest partners in trade and investment. With more than 800 million inhabitants, these two markets jointly represent one-third of trade and more than half of the world’s Gross Domestic Product (GDP), according to the European Commission.
Both are members of the World Trade Organization (WTO) since its creation in 1995, which has boosted trade development between the two regions. Fashion has been one of the most benefited sectors: in the last decade, European fashion exports to the United States have skyrocketed by 60%, to 15,460 million euros.
In November 2011, within a bilateral summit between both markets, the EU and US created a High Level Working Group on Jobs and Growth (Hlgw) to identify and asess the different options that could improve bilateral trade relations on both sides of the Atlantic.
In the last decade, European fashion exports to the United States have skyrocketed
In its final report, the Hlwg recommended the negotiation of a broad agreement on trade and investment between the two countries that also included regulatory aspects. Following these negotiations, in 2013 both markets began to work on the Transatlantic Trade and Investment Partnership (TTIP), which included access to markets, regulatory aspects and a set of global rules in the field of intellectual property. Since its inception in 2013, fifteen rounds of TTIP negotiation were held, the last one in New York on October 2016.
However, in December 2016, just after Trump’s election, negotiations were suspended and, with Trump in power, they never resumed. With the TTIP on stand by, in 2018 another decisión hit the commercial relationship between both markets. In March, Trump announced the imposition of an additional 10% tax on all European imports of aluminum and 25% on steel.
The then-president of the European Commission, Jean-Claude Juncker, responded at that time with a direct attack on fashion, threatening tariffs on American products such as Levi’s jeans, Harley-Davidson motorcycles, and Bourbon whiskey.
The truce finally arrived in July: Juncker and Trump agreed to a joint declaration that included as main objective to achieve a liberalization of tariffs on industrial goods (excluding cars) between both markets. The pact also included carrying out a reform of the WTO to address unfair commercial practices, one of Trump’s main claims since the election campaign.
According to a study prepared by the European Commission, the elimination of tariffs on industrial goods would increase EU exports to the United States by 8% in 2033, with revenues of 27,000 million euros. US sales to the EU would increase by 9%, by 26,000 million euros.
When the scneario seemed calm and with the focus of the trade war with China, and not on Europe, new bad news came, stamped with the green light from the World Trade Organization (WTO).
The regulator has approved US tariffs on 7.5 billion-dollars worth of EU imports in response to ilegal subsides received by Airbus by European governments for the development of the A350 and A380 models in 2004, long before the current commercial war began.
Washington has not yet made public the list of items that will be affected by the tariff-raise, which will come into effect on October 18, but everything suggests that fashion will not escape it. In the provisional list published last April, there are sweaters, suits, bags and other types of clothing and fashion accessories.
But this is far from being the last chapter. The conflict started fourteen years ago still has another pending battle: the European Union can retaliate against Boeing too, but it has to wait at least next year, which means that another set of tariffs may be coming soon.