Tariff Tide Rolls in Alabama Toward Airbus, Mercedes

(Bloomberg) --

Trade wars are fought between nations. But the damage is often about regions and politics. Which is exactly how things are developing when it comes to President Donald Trump’s forthcoming escalation with the European Union.

In the coming days the World Trade Organization is expected to give the U.S. the final go-ahead to apply punitive tariffs on $5 billion to $7 billion in imports from the EU, bringing to an end one leg of a nearly 15-year fight over aircraft subsidies.

The move will hurt the EU. But it could also be bad news for the good people of Alabama.

High on the list of imports to be targeted are Airbus fuselages and landing gear made in Europe that are shipped in and turned into A320 aircraft for the U.S. market in Mobile, Alabama. Depending on how high they are, the tariffs could threaten the economics of the Mobile operation, which Airbus is ironically in the process of expanding.

It’s not just planes in the firing line, of course. Trump has threatened to hit European carmakers with tariffs on imported cars and parts and faces a self-imposed deadline in November over whether to go ahead with those. That too could have repercussions across Alabama. Mercedes has had a plant near Tuscaloosa since the 1990s. The SUVs assembled there feature engines imported from Germany.

Alabama doesn’t have to look far to see how other states have been hit by the trade wars. Bourbon distillers in nearby Kentucky, home of Senate Majority Leader Mitch McConnell, have been weathering the storm since the EU responded to Trump’s steel tariffs by targeting the whiskey for retaliatory duties.

That has actually turned Kentucky into a curious EU ally in the diplomatic fight against tariffs.

At a recent reception in Washington, the EU’s new ambassador to the U.S., Stavros Lambrinidis, hosted the mayor of Louisville, distillers and other Kentucky businesses as well as the state’s poet laureate at a good-natured, anti-tariff party fueled by Old Fashioneds and other bourbon cocktails.

Guests left with specially branded, wax-sealed bottles of “Kentucky&EU” bourbon and glasses with the words “Raise a glass — not tariffs!” etched on them. Among the swag was a wooden baton with a simple cocktail recipe attached. It called for ice, a shot of either bourbon, scotch, cognac or Irish whiskey and one final important step: “Muddle tariffs.”

Charting the Trade War

Nigeria and Benin are embroiled in a trade dispute two months after signing an agreement to free up the movement of goods and services in Africa. Nigeria ordered the partial closing of its boundary with Benin last month to curb smuggling of rice and other commodities. The blockade has had a ripple effect across West Africa, with factories and traders struggling to import key raw materials and having to use alternative routes for their exports.

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• Saving bacon | Chinese companies are preparing to purchase more U.S. pork as the government in Beijing tries to boost supplies amid domestic shortages.
• Sending a message | Trump used his UN speech to reiterate complaints about China’s trade practices just weeks before negotiators from both sides are due to meet in Washington.
• Vietnam buckles | Vietnam’s campaign to tamp down the Trump administration’s trade gap ire has come to a coastal commune better known for growing dragon fruit.

Economic Analysis

• Bandaging wounds | China is set to raise policy support further in coming quarters to cushion a downturn.
• Mexican momentum | Growth should continue to underwhelm in Mexico both this year and next.

Coming Up

• Sept. 26: U.S. advanced goods trade balance for August 
• Sept. 24-30: The General Debate of the UN General Assembly

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe SchneeweissRichard Bravo

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