The European Union is assembling a list of American goods to hit with retaliatory tariffs after the United States failed to comply with a World Trade Organization dispute panel ruling that directed it to adjust its ongoing tariffs on ripe olives from Spain.
An EU spokesperson told Agri-Pulse earlier that the bloc “is currently finalizing a list of specific products to be targeted by its countermeasures.” WTO principles dictate that retaliatory tariffs should be applied, where possible, to the same sector as the offending tariff, suggesting the EU could hike tariffs on several U.S. agricultural exports.
The scope of the retaliatory tariffs, however, is still being determined. The EU has requested authorization from the WTO for a retaliatory package worth $35 million – an amount, the EU says, is equivalent to the export losses triggered by the U.S.’ failure to bring its antidumping and countervailing duties into compliance with the WTO dispute settlement body ruling. But the U.S. challenged the $35 million figure in a WTO filing, sending the issue to arbitration.
In the arbitration process, a panel will determine the appropriate value of retaliatory tariffs.
The WTO “will authorize the EU to impose retaliatory duties,” John Clarke, former head of the EU delegation to the WTO, told Agri-Pulse. The only question is whether the panel agrees that Spanish producers suffered losses of $35 million or recommends a lower figure, Clarke said.
The U.S. antidumping and countervailing duties on Spanish olives were imposed in 2018 under then-President Donald Trump. With Trump returning to the White House next year, Clarke said he anticipates EU retaliatory tariffs will target products from Republican-controlled states, while avoiding sectors in which the bloc depends on U.S. product imports.
The EU “will try to target somewhere where it really hurts politically,” Clarke said, adding that it will likely prioritize agriculture but that retaliatory tariffs could be applied to other industries.
Clarke, who later served as the bloc’s chief agricultural negotiator, pointed to the EU response to U.S. tariffs levied on steel and aluminum during Trump’s first term as a possible template for how the European Commission might respond in the olive case.
“We did it on bourbon and Harley Davidson [motorcycles] and not on almonds, which, a., we needed, and b., was from a Democratic state,” Clarke said.
Bill Reinsch, a senior adviser with the economics program at the Center for Strategic and International Studies, agreed, but pointed out that changes in the Republican Senate leadership might mean a new combination of products hit with retaliatory tariffs.
CSIS's Bill Reinsch.“The EU has a standard retaliation list,” Reinsch said. “They make changes depending on who the leadership is, and what the economics in the EU are.” When former Rep. Paul Ryan, R-Wis., was speaker of the House, for example, cheese was on the list, Reinsch said.
The EU did not respond to a question from Agri-Pulse about whether it would target products from Republican states and districts.
Ultimately, the goal of retaliatory trade measures is to get the United States to achieve WTO compliance, Daniel Mullaney, former assistant U.S. trade representative for Europe and the Middle East, told Agri-Pulse. “The EU has in the past chosen products that they think will help push us in the right direction.” Mullaney is now a nonresident senior fellow at the Atlantic Council, a Washington-based think tank.
Spurring the U.S. to bring the tariff in line with the WTO’s ruling may be a tall order, however.
The Commerce Department made some changes to the tariff following the WTO’s 2021 dispute panel ruling that resulted in a lower duty rate. But a separate ruling this year found the U.S. antidumping and countervailing duties were still not compliant. The ruling puts the WTO ruling at odds with U.S. court decisions and U.S. laws designed to protect agricultural producers from foreign subsidy programs. And while the olive case is the first time the WTO has weighed in on the law, Reinsch said, it could be the first of many cases in which the U.S. response to foreign agricultural subsidies leads to adverse dispute panel rulings and retaliatory tariffs.
“There are larger issues implied in the decision, because the provision of law that they're challenging could end up being used by the U.S. in other cases,” Reinsch said.
At issue is a section of the Tariff Act of 1930 known as 771B, enacted in the 1990s, which assumes the benefits of subsidies given to producers of raw agricultural products are passed on to lightly processed products using that raw ingredient and should be reflected in countervailing duties. In this case, the Commerce Department determined that subsidies to olive growers in Spain warranted countervailing duties applied to brined, pitted, chopped, frozen, stuffed or otherwise preserved olives – all lightly processed products made from the subsidized raw olives.
Changing the law, particularly in the near future, would be politically difficult, Reinsch said. The appetite in Congress right now is for tightening, not loosening, trade remedy laws. And the process for adjusting antidumping and countervailing duty law is lengthy and complicated.
“Even if there were support for getting rid of this provision, which I think there is not, but even if there were, if you tried to deal with it, you'd have a boatload of other amendments and other changes to that law that people want to make,” Reinsch said.
In the meantime, Reinsch said, Europe is likely to challenge U.S. trade remedies against its agricultural products any time Section 771B is applied.
“The Europeans have been pretty clear that their remedy is to amend the statute, remove the provision,” Reinsch said, adding that “they're dogged about stuff like this.”
Other countries may challenge tariffs applied to their agricultural exports too but will have to weigh the political calculations.
“There's a lot of things that go into that kind of calculation, including your overall relationship with the U.S., how vulnerable you are to us being unhappy with you and how much is at stake,” Reinsch added.
If arbitration keeps the retaliatory value around $35 million, the cost of retaliatory tariffs in the olive case would be low. And with larger U.S.-EU tariff fights potentially on the horizon – including a truce in the Boeing-Airbus trade dispute set to expire in 2026, Trump’s across-the-board tariff threat and suspended EU retaliatory tariffs for U.S. steel and aluminum tariffs – new tariffs in the spat over olives could be folded into a broader U.S.-EU trade dispute negotiation.
Rep. Doug LaMalfa, R-Calif.“I'm skeptical we'll see these tariffs applied,” said Brian Kuehl, executive director of Farmers for Free Trade, an advocacy group pushing more U.S. farm exports. “I think they put this in their back pocket. And if we get into a major trade war, it's one more card they can lay on the table.”
Republican Rep. Doug LaMalfa, who represents a district in Northern California within the olive growing region, told Agri-Pulse through a spokesperson that picking a tariff fight with the incoming president over olives would be a “grave mistake.”
“Spain should stop subsidizing and dumping olives in the U.S. which violates good trade practices and is destroying the U.S. olive industry,” LaMalfa said.
Reinsch also pointed out that the U.S. may prevent tariffs by opting to reimburse Spanish olive growers at the value of their losses, as it did in 2014 after losing a WTO dispute brought by Brazil against U.S. cotton subsidies.
“Nobody in the United States wanted to suffer the political consequences of trying to get rid of cotton subsidies … so in the end, what they ended up doing is paying Brazilian cotton farmers in the amount of whatever the damage was,” Reinsch said, arguing that the U.S. government could do the same in the olive case today “
“The Europeans may not like that, because it maintains the harm. But it is another way to address the problem.”
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