European Vineyards, Cheesemakers React to Blow From U.S. Tariffs

(Bloomberg) --

Spanish winemaker Baron de Ley SA has made the U.S. a priority for exports as it seeks out new markets to help cushion the blow of Brexit -- only to face the threat of tariffs.

“This news has fallen on us like a dead weight -- the U.S. is a young market for us but increasingly important,” said Eduardo Santos-Ruiz, chairman of the vineyard headquartered in a 16th century monastery in the wine-growing region of La Rioja. Baron de Ley relies on export markets for 50% of its revenue and last year appointed a new U.S. distributor to help boost sales.

Cheeses from France, Italy and the Netherlands, wines, Scotch whisky and Greek canned peaches are just some of the European exports whose prices are set to rise in the U.S. after the Trump administration announced new tariffs on billions of dollars of EU products starting Oct. 18.

The World Trade Organization gave President Donald Trump’s administration the go-ahead to impose tariffs on as much as $7.5 billion ($8.2 billion) of European exports annually in retaliation for illegal government aid to Airbus. The news hit European producers already struggling with other challenges, including the U.K.’s potential exit without a deal from the European Union.

Spain’s Foreign Ministry on Friday summoned the U.S. ambassador in Madrid Duke Buchan III to complain about the tariffs.

“It is possible that the U.S decision could spark EU retaliatory measures, but we think that neither the EU nor the U.S. should engage in a trade war that would weaken both sides,” Italy’s Foreign Minister Luigi di Maio said in a letter to Italian companies. “What is at stake is the success of our companies, the benefits for all the countries of the world that want to buy from them and the economy of our country.”

Here are some European reactions to the news of potential U.S. tariffs:

France:

• “By taxing non-fizzy wine, cheese and French pork with additional duty of 25%, it is affecting a market worth more than 1 billion euros,” the French farmers’ lobby FNSEA said in a statement. “But the overall repercussions are much more significant and impact the whole single market, with potentially devastating indirect consequences.”

Italy:

• Finance Minister Roberto Gualtieri said Italy would work at EU level to avert U.S. tariffs.
• “The U.S. is definitely the most important market for wine globally and if tariffs are confirmed they could create very significant damage,” said Roberto Giannelli, a wine producer in Tuscany’s Montalcino region and owner of the San Filippo Montalcino winery.

Spain:

• Spain’s government estimates the tariffs will affect 1 billion euros worth of agricultural and food exports to the U.S., Agriculture Minister Luis Planas said.
• The U.S. represents 10% of exports from Spain’s Rioja wine region, generating 62 million euros of sales, according to Inigo Torres, manager of Grupo Rioja, an association grouping most of the region’s wineries.
• “Tariffs are supposed to be enforced very soon, so we didn’t have the time to speed up shipping to avert them,” said Torres.
• “We want to have the best transatlantic relations, in this case with the U.S.,” Spain’s acting Prime Minister Pedro Sanchez said. “But I also have to say that my responsibility is to defend, in this case, the agricultural sector from any type of tariff blow that we might see in the coming weeks.”

Greece:

• Producers of canned peaches will suffer from the tariffs, dealing a blow to growers who had been counting on boosting shipments to the U.S. because of its trade dispute with China.
• Greece has exported about $50 million of canned fruit to the U.S. annually for the last seven or eight years.
• “It’s a domino for both farmers and manufacturers,” said Kostas Apostolou, head of the Greek Canners Association.

Portugal:

• “We’re worried because it will affect exports of cheese to the U.S.,” said Maria Candida Marramaque, director of Anil, an association that represents the dairy industry in Portugal.
• Portugal exports about 3 million euros of cheese to the U.S. every year, representing about 1% of its dairy exports.

Netherlands:

• About half of Dutch cheese exports to the U.S. will be affected by U.S. import duties on EU goods, according to the ministry of foreign trade.
• The Netherlands exported 80 million euros of cheese to the U.S. in 2018.
• Import duty of 25% will affect about 39 million euros of those exports from Oct. 18.

Germany:

• “It’s unacceptable for me that our farmers are being dragged into a fight about aircraft subsidies and are being made the main victims,” Agriculture Minister Julia Kloeckner was cited as saying by Top Agrar website.

Ireland:

• “Any new trade tariff is an unwelcome barrier to doing business and will have a significant cost impact on our business,” said Ornua Co-operative Ltd., the maker of Kerrygold

U.K.:

• “The U.K. government is clear that resorting to tariffs is not in the interests of the U.K., EU or U.S.,” Britain’s Department for International Trade said in a statement.
• “The tariff will undoubtedly damage the Scotch Whisky sector,” the Scotch Whisky Association said in a statement. “The U.S. is our largest and most valuable single market, and over 1 billion pounds of Scotch Whisky was exported there last year. The tariff will put our competitiveness and Scotch Whisky’s market share at risk.”

European Union:

• “We deeply regret that the agricultural sector is once again paying the bill for a political decision on trade that has nothing to do with agriculture,” Pekka Pesonen, secretary general of Copa-Cogeca, the main European farm-lobby group, said in a statement.

--With assistance from Eleni Chrepa, Joao Lima, Rudy Ruitenberg, Chiara Albanese, James Regan, Bryce Baschuk, Jonathan Roeder, Alex Morales and Charlie Devereux.

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editors responsible for this story: James Amott at jamott@bloomberg.net, Zoe Schneeweiss, Nick Rigillo

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