Since the founding of American Heritage over 16 years ago, we have been dealing with tariffs on the import of American products. Unfortunately, these tariffs also impact our prices and make our products in the assortment more expensive. In this article, we would like to explain the reasons behind these tariffs, the underlying causes, and the implications for you as our customers.
What are punitive tariffs and why do they exist?
Tariffs are charges that apply when certain goods are transported across a customs border. As far back as the Medieval period, tariffs were already imposed to prevent the import of foreign products and thereby support and promote domestic industries. Additionally, tariffs served as a source of revenue for the state. Today, punitive tariffs are used whenever one country feels economic unfairness and discrimination from another. In most cases, however, the country imposing the tariff also harms itself, as tariffs are disadvantageous to its own economy. At the end of the day, essentially everyone loses – and you as a consumer and customer are particularly affected, as punitive tariffs are factored into the product price calculation. So, you end up paying more.
Boeing and Airbus – the cause of fluctuating punitive tariffs
The trade dispute between the EU and the USA regarding Airbus and Boeing has been ongoing for over 16 years now. Both parties accuse each other of providing unlawful subsidies to their respective aircraft manufacturers. The result is that punitive tariffs or so-called compensatory tariffs are repeatedly imposed to offset the competitive disadvantage suffered by each party. The election of Donald Trump as US President intensified the situation further. In 2019, the World Trade Organization (WTO) granted the United States the right to impose punitive tariffs against the EU, totaling around $7.5 billion, which were subsequently implemented. However, the latest example is the punitive tariffs imposed by the EU, amounting to about $4 billion, affecting many imported products from the USA. The definitive ruling, based on the unlawful aircraft subsidies provided to Boeing by the USA, was issued by the WTO on October 13, 2020. Immediately after the decision, the EU initially aimed for de-escalation and did not impose corresponding punitive tariffs, awaiting ongoing settlement talks with the USA concerning the US punitive tariffs introduced in 2019. After the negotiations failed, on November 11, 2020, the EU Commission did introduce punitive tariffs on American goods.
The chronology of punitive tariffs between the USA and the EU
- In June 2018, the USA imposes punitive tariffs on EU goods including aluminum (10% tariff) and steel (25% tariff) to boost its own economy
- In retaliation, the EU imposes 25% punitive tariffs on items such as jeans, bourbon whiskey, motorcycles, and peanut butter imported from the USA, amounting to a value of $2.8 billion
- On October 18, 2019, the USA imposes punitive tariffs on cheese, coffee, tools, and other goods originating from the EU
- In early February, the existing punitive tariffs on products are expanded to include all goods composed of two-thirds steel and aluminum
- On March 18, 2020, the USA increases the tariff from 10% to 15% (primarily affecting aircraft imports)
- At the end of June, the USA imposes 25% tariffs on jams and preserves from Germany and France
- On October 13, 2020, the WTO allows the EU to impose retaliatory tariffs of up to $4 billion
- After the EU's intended settlement talks failed, punitive tariffs are imposed on various items from the USA starting November 10, 2020, including ketchup, sauces, aiolis, nuts, chocolates, as well as gaming consoles, helicopters, and tractors
The Costs Associated with Importing American Goods
American Heritage is renowned for importing great lifestyle products and culinary highlights from the USA. However, it's less known what costs are involved in importing these goods. We'd like to explain this to you in the following. In addition to the actual product costs and the associated freight or delivery costs, there are also import value-added taxes, and in a few cases, consumer taxes, customs rates, and indeed, the aforementioned tariffs. The import value-added tax is 19% or 7%, depending on whether it's a product from the food sector (7%) or not. So, the import value-added tax for a rocking chair is 19%, while for our popular Stonewall Kitchen Country Ketchup, it's 7%. Imported coffee, tobacco, and alcohol also incur the consumer tax. Added to this is the customs rate, calculated from the purchase price and the shipping costs. Last but not least, tariffs must be paid for affected goods. For most of our products, these tariffs currently stand at 25% of the purchase price.
What the Tariffs Mean for You as a Customer
As you can see, importing American products comes with quite a few costs. Therefore, the 25% tariffs on some of our favorite products that are added to the existing tariffs hit us particularly hard. At American Heritage, we strive to keep prices fair and attractive for you as customers or wholesalers, and therefore, we operate with a small margin. However, these tariffs result in some of the products we offer no longer being profitable. Unfortunately, due to this, we have no choice but to adjust and increase prices as of January 1, 2021.
What's Next for the Tariffs?
As for the future of tariffs, we can't say for certain. However, the US presidential election, won by Joe Biden, offers a reason for hope. Under the leadership of the newly elected US president, there's currently speculation about a new willingness for cooperation between the EU and the USA. The goal of these discussions should be the reduction of protectionist measures and a stronger international cooperation. We hope for the best so that we can continue to indulge you with the finest products from the USA in the future!