The EU imposes 25% tariffs on US sweet potatoes

This November, the EU placed a 25% tariff on US sweet potatoes. The tariffs are a retaliatory measure following the decision reached by the World Trade Organisation in October that aerospace company Boeing received an unfair amount of support from the US. The tariffs are set to negatively affect trade between the US and the EU and lead to a decline in US sweet potato exports to the EU.

Background of the Dispute

The EU and the US have been engaged in a long-running dispute, wherein each party has claimed that the other unfairly subsidized their airplane manufacturer. The conflict dates back to 2006, where the US claimed that Airbus has received illegal subsidies from the EU, and reported the case to the WTO. The EU then made a similar claim regarding the US and Boeing. The WTO found both parties to be at fault, and in October 2019, allowed the US to impose tariffs up to USD 7.5 billion in EU goods.

This November, however, a new phase in the saga was reached, with the WTO authorizing the EU to impose close to USD 4 billion in retaliatory tariffs towards the US, which includes a 25% tariff on certain US agricultural products when entering the EU, including sweet potatoes. Sweet potatoes are amongst the top 10 affected agricultural products. According to the American Farm Bureau Federation, over 60% of EU tariffs are imposed on agricultural products from the US.

Source: American Farm Bureau Federation

Impact on US Sweet Potato Exports

The sweet potato harvest has recently concluded in the Southeast of the US, which includes states such as North Carolina and Mississippi, where the majority of the crop is grown. As most global suppliers are out of season, this has resulted in increased demand in the EU for US sweet potatoes and the tariff increase, from 3% to 25%, is set to severely impact export revenue for the US and lead to the loss of a lot of business for US exporters. This may also lead to a shortage of sweet potato supply in the EU as the US is the leading global supplier and a major source of sweet potatoes to the EU for which there are not a lot of other suppliers available at this time to fill in the supply deficit, as other major suppliers to the EU market, such as Netherlands and Spain, are currently out of season.

Source: ITC Trade Map

Market Outlook

Although agricultural goods are not necessarily the cause of the dispute, it is common in trade conflicts for these products to be the first to be subject to retaliatory tariffs as they are heavily imported by the EU and would have a significant impact on US exports. The ongoing dispute has severely affected trade on both sides and the European Commission has stated its willingness to engage in negotiations with the US as a means to end the trade war and agree on long-term disciplines on aircraft subsidies. The German Economy Minister Peter Altmaier expressed a similar sentiment and stated that there is much optimism amongst many EU members following Joe Biden's presidential election win. As a result, it is hoped that a resolution can be reached along with a general improvement of ties between the US and the EU.

Sources:

The Packer. “European Union slaps tariff on blueberries, sweet potatoes.” 

AgWeb. “European Union slaps tariff on blueberries, sweet potatoes.” 

American Farm Bureau Federation. “EU to Impose Tariffs on $4 Billion in U.S. Goods.” 

Fresh Plaza. “European Union tariff on US goods affects sweet potatoes, grapefruit and more.” 

EUR-Lex. “Official Journal of the European Union.” 

AP News. “EU puts tariffs on US but hopes for change with Biden.” 

European Commission. “Boeing WTO case: The EU puts in place countermeasures against U.S. exports.”