The verdict is in.
After months of deliberation, the Geneva-based World Trade Organization has given the U.S. the green light to slap tariffs on almost $7.5 billion of European goods imported to the U.S. annually as part of a spat over aviation subsidies. The U.S. had wanted to target close to $11 billion.
The U.S. will publish a final list of products shortly. A previous one included handbags, suits and Champagne, and if these products end up on the final list, it will leave retailers with little choice but to raise prices on many European luxury goods.
On a company level, LVMH Moët Hennessy Louis Vuitton has been singled out as being particularly vulnerable to the tariffs due to its multiple fashion and beverage companies. (In addition to Champagne, wine and whiskey have also been targeted.)
Its share price was down 3.3 percent to 345 euros. Elsewhere, Kering slid 3.8 percent to 436.6 euros; Capri Holdings, which owns Versace, fell 4 percent to $30; Salvatore Ferragamo, 3 percent to 16.36 euros, and Tod’s, 1.9 percent to 44 euros.
The levies, the largest arbitration award in the history of the WTO, are a result of the worsening battle between the U.S. government and European authorities, which provide subsidies for aerospace company Airbus. While tariffs on aircraft take center stage in the dispute, luxury goods have also been dragged into the fray, frustrating many in the industry, which is dealing with fallout from the ongoing U.S. trade war with China.
The industry has already been hit with 25 percent tariffs on Chinese-made handbags and this will rise to 30 percent later this month, double the additional trade war duties on apparel and footwear.
“For me, taking the textiles and clothing between this issue is just crazy,” Francesco March, a former director-general at the European Apparel and Textile Confederation, told WWD.
“It is not through commercial retaliation that a solution will be found, it’s clear for me….I don’t see the reason even to put textiles and clothing on the black list,” he added. “Companies would be hit very hard.”
Cecilia Malmström, European Commissioner for Trade, said: “If the U.S. decides to impose WTO authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same.”
Brussels plans to retaliate, but has to wait for the WTO’s approval as it filed its complaint after the U.S.
The U.S. is expected to respond later today.
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