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Could Biden’s Europe Visit End US-EU Tariff Tantrum?

As President Joe Biden preps his visit to Brussels for a summit with European leaders on June 15, the United States and the European Union have set a new goal of lifting tariffs placed on goods by Dec. 1, according to reports from The New York Times and Bloomberg.

Both sides want to reach an agreement by July 11, with a joint statement having been prepared ahead of the summit, according to the reports.

The joint statement suggested that both sides are keen on ending tariffs on goods that range from American-made Levi’s jeans and peanut butter to European handbags over $20, wool sweaters and vests, cashmere and cotton.

“We commit to make every effort possible to find comprehensive and durable solutions to our trade disputes and to avoid further retaliatory measures burdening trans-Atlantic trade,” the statement said, according to reports.

The tariffs are related to a longstanding dispute between the E.U. and the U.S., which both claim that the other’s chief airplane manufacturer—Boeing for the U.S. and Airbus in the E.U.—is unfairly subsidized by their respective governments, thus hurting their own business.

The World Trade Organization ruled separately in 2016 for in favor of the U.S.’s claim and in 2018 in the favor of the E.U.’s claim, authorizing both parties to impose tariffs on the other. In total, The E.U. had imposed tariffs on about $4 billion of American products, while the U.S. levied tariffs on $7.5 billion of European goods.

But with a new presidential administration comes new potential to rework trade agreements.

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In March, the U.S. and E.U. agreed to temporarily suspend tariffs on billions of dollars of each other’s aircraft, wine, food and other products as both sides try to settle the airline dispute. The U.S. also jointly announced a four-month cease-fire with the U.K. that same month.

The Biden administration is coming into the summit with the goal to rebuild trade relationships with European allies, which were hampered by former President Donald Trump’s often-retaliatory approach to levying tariffs, which was most largely associated with the ongoing trade war with China.

From a retail standpoint, easing tariffs would be welcomed in a time when increasing consumer demand has led to supply chain bottlenecks such as port congestion, increasing shipping and raw materials costs, and a shortage of shipping containers.

Earlier in June, the Biden administration suspended retaliatory tariffs on European countries in response to 2 percent digital services taxes that they have imposed as negotiations over a broader tax agreement play out.

The two governments are still trying to resolve a dispute over the steel and aluminum tariffs that the Trump administration imposed in 2018. The administration posed 25 percent tariffs on imports of European steel and 10 percent on aluminum spurred retaliation from Europe, which imposed similar duties on American products like bourbon, orange juice, jeans and motorcycles.

“We should finally put ongoing disputes, of which unfortunately there are some, behind us,” said Heiko Maas, Germany’s minister of foreign affairs. “We are now making progress in some areas: the moratorium on punitive tariffs from the Airbus-Boeing dispute and the E.U. decision against responding in kind to the measures in the dispute over steel and aluminum tariffs.”

Not all tariffs in the region appear to be on the road to reduction. In fact, after a one-year investigation of Digital Service Taxes (DSTs) adopted by Austria, India, Italy, Spain, Turkey and the U.K., United States Trade Representative (USTR) Katherine Tai said the U.S. would impose additional tariffs on certain goods from these countries.

Retail and apparel groups such as the Retail Industry Leaders Association (RILA) and the American Apparel & Footwear Association (AAFA) urged the Biden administration to abandon the plan to impose tariffs of up to 25 percent on certain products from these nations.

However, the tariffs would be suspended for up to 180 days to provide additional time to complete the ongoing multilateral negotiations on international taxation at the Organization for Economic Cooperation & Development (OECD) and in the G20 process.

At the summit, the U.S. and E.U. plan to establish a trade and technology council to help expand investment and prevent new disputes from emerging, the document said. It will also focus on strengthening supply chains for technology such as semiconductors, which have been in short supply in the last year.

As part of the rebuild, administration officials have said that they want to soften relations with allies like the E.U. to counter China and Russia, with the former continuing to gain growing economic influence.

President Biden has thus far steered clear of hitting China with new tariffs, but he hasn’t removed the duties Trump imposed on $360 billion worth of Chinese goods.