UK firms warn Washington tariffs may impede free-trade talks

British industry has warned Washington that prolonging a painful barrage of U.S. tariffs risks setting back efforts by both countries to reach a free-trade deal that lies at the heart of Prime Minister Boris Johnson’s post-Brexit economic strategy.

The U.S.’s authority to impose levies, granted last October by the World Trade Organization in a dispute over subsidies to Airbus SE, covers $7.5 billion of European Union products annually. Washington reviews it for changes every six months, and the next batch could arrive this week.

In June, the U.S. Trade Representative’s office threatened to introduce new or raise existing tariffs to as high as 100% on some goods, including a new list worth $3.1 billion of gin, beer, coffee, chocolate and whiskies from Germany, Spain, France and the U.K.

Already pummeled by the pandemic, the hospitality industries and retailers in both countries have stepped up their pleas for relief, according to nearly 24,000 public comments to USTR posted online ahead of the late-July deadline for submissions.

Several letters from British corporate interests go beyond the myriad complaints about the damage tariffs are doing to businesses ranging from American wine importers to makers of Scotch whisky. The import taxes might just spoil the goodwill established in ongoing trade talks, they said.

‘Deliberate Snub’

“Maintaining tariffs on U.K. whiskies (or, worse, imposing new ones) would be unduly provocative—a deliberate snub in response to the extension of an olive branch,” according to a letter to USTR from the North American unit of London-based Diageo Plc. “It would be entirely out of step with the U.S. expressed goals in the ongoing bilateral dialogue with the United Kingdom.”

The Confederation of British Industry, representing some 190,000 businesses, said that while it’s encouraged by the political will on both sides to negotiate a bilateral trade deal quickly and comprehensively, “it will be difficult for small businesses to truly benefit from a comprehensive deal if these tariffs are still in place.”

“Imposing additional tariffs on U.K. products at a time when all energies should be focused on advancing transatlantic trade negotiations sends the wrong signals to our business community and beyond,” according to a letter from BritishAmerican Business, a trade association.

De-escalating the dispute “would send a positive signal and reinforce the stated U.S. government desire to move quickly on a U.S.-U.K. trade agreement,” the group said.

The EU, meanwhile, is waiting for a WTO ruling to come as early as September that may allow for retaliation against the U.S. Brussels has asked for a multibillion-dollar award in a separate case that found Chicago-based Boeing Co. received illegal subsidies.

British companies are in a difficult spot. They’re still exposed to U.S. tariffs because they were part of the EU during the 15-year Airbus dispute at the WTO, but the U.K. government is largely frozen out of any effort by Brussels to negotiate a settlement now that Britain has left the bloc.

U.K. International Trade Secretary Liz Truss was in Washington last week for the third round of talks to reach a trade agreement.

National Security

Also last week, U.K. officials were reminded that doing a deal with the U.S. doesn’t necessarily offer protection against Trump administration tariffs. Five weeks after the U.S. Mexico Canada Agreement took effect, replacing Nafta, the U.S. said it would reinstate 10% duties on some Canadian aluminum, citing a broad definition of national security. Canada vowed to retaliate dollar for dollar.

It’s not just British companies that stand to lose from the transatlantic tariffs. Mars Wrigley U.S., the New Jersey-based candy maker, said that a 25% tariff on sweet biscuits imported from Germany and the U.K. to make some Twix candy bars may jeopardize Americans’ access to them.

“Should these tariffs be maintained or increased, we may be forced to discontinue the sale of all Twix white chocolate products in the U.S. market,” the company said in its letter, dated July 24. “Small businesses, specifically convenience stores, and U.S. consumers would be negatively impacted by losing access to this unique product.”