STACEY VANEK SMITH, HOST:
Tariffs - 2018 was full of them.
CARDIFF GARCIA, HOST:
Like those tariffs that were imposed as part of the big trade war between the U.S. and China - which, obviously, is still going on...
VANEK SMITH: Yes.
GARCIA: ...When tariffs were imposed on hundreds of billions of dollars' worth of goods that China sells to the U.S. And then, of course, there were retaliatory tariffs that China imposed on goods that the U.S. sells to Chinese people.
VANEK SMITH: But it looks like 2019 might also be year of the tariff. Last night, the Trump administration proposed new tariffs on billions of dollars' worth of goods from Europe.
GARCIA: Everything from helicopters to cheese to motorcycles to wine.
VANEK SMITH: Not to mention olive oil and snails...
GARCIA: Snails.
VANEK SMITH: ...And wine.
GARCIA: (Laughter) And the reason...
VANEK SMITH: (Laughter).
GARCIA: ...Was interesting. Apparently, it has to do with a nearly 15-year-old spat between the U.S. and Europe over airplanes.
This is THE INDICATOR from Planet Money. I'm Cardiff Garcia.
VANEK SMITH: And I'm Stacey Vanek Smith. Today on the show, European tariffs. What would be taxed? Why? And where's this all going? Also, Cardiff, we should probably run out right now and just stockpile Gruyere.
GARCIA: You think I don't have a...
VANEK SMITH: (Laughter).
GARCIA: ...Stockpile of Gruyere already.
VANEK SMITH: You got to double down. Now the stakes are higher. Also, you're going to need a crisp Italian white to pair with it because we're not animals.
GARCIA: Perfect.
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VANEK SMITH: To figure out what was going on with European tariffs, I called up Chad Bown. He's a friend of the show and an economist with the Peterson Institute. He also hosts his own podcast called "Trade Talks."
So I got in touch with you this morning because, you know, I saw a headline. It was like, oh, more tariffs, you know, or sort of more tariff news - this time, the European Union. I was sort of skimming the article, like half-awake. And then all of a sudden, I saw these words wine and cheese. And it got real. And I was like, I've got to call Chad (laughter).
CHAD BOWN: Exactly. Well, wine and cheese - it sounds like we have a bit of a problem. I agree. So what this is all about is the United States, for a long time, has been fighting with Europe about subsidies to aircraft, so Boeing and Airbus.
VANEK SMITH: Yes.
BOWN: The Europeans have been fighting with us saying, hey. You subsidized Boeing. And we've been fighting with them, saying, hey. You subsidized Airbus - these big aircrafts.
VANEK SMITH: And this fight has been going on for almost 15 years.
BOWN: So this has been going on for - this particular fight has been going on for 15 years. But the broader issue goes back to the 1970s. I mean, this has just been going on forever - forever.
VANEK SMITH: The two big plane makers in the world - Boeing...
BOWN: Basically, since the Wright brothers have started to fly...
(LAUGHTER)
BOWN: Subsidies have been given to the makers of airplanes and - yeah. So that's what we...
VANEK SMITH: By their respective countries - and lawsuits have been filed over these subsidies.
BOWN: Exactly. And so what happened in this particular case is the United States government filed a case at the World Trade Organization against the European Union and, essentially, won the legal arguments - so found that the EU has been subsidizing, has been giving funding to Airbus, essentially. And so we're now at the stage with the WTO where the United States says the Europeans haven't gotten rid of their subsidies yet. They're causing harm to us. And we're going to propose a number that we think we're being harmed by and we'd like to retaliate over.
And so the number they threw out was $11 billion worth of trade. And so the argument is, you know, we should be able to put tariffs on $11 billion worth of stuff coming in from Europe unless the Europeans actually get rid of these subsidies.
VANEK SMITH: So that could be a proper indicator for today's show - $11 billion.
BOWN: Exactly. That would be a great indicator.
VANEK SMITH: Done - today's indicator is $11 billion. The U.S. is proposing tariffs on $11 billion worth of goods from Europe.
BOWN: Exactly.
VANEK SMITH: But wait. From what I understand with this EU-U.S. situation - like, we're not blessed innocents in this, right? Like, aren't we doing the same thing? Aren't we also giving money to our airplane makers?
BOWN: Exactly. And so the argument historically is the Europeans are just more brute-force about it.
VANEK SMITH: (Laughter).
BOWN: The Americans tend to give subsidies in the form of - you know, we - military contracts, say. So, yes, the short answer is, we all live in glass houses.
(LAUGHTER)
BOWN: And we're now all throwing stones.
VANEK SMITH: So my other question is, if this has been sort of cooking for all these years, why now? Why are we going after the EU now?
BOWN: President Trump really likes tariffs, I think, is the short answer.
VANEK SMITH: (Laughter).
BOWN: Any problem...
VANEK SMITH: That's fair, you know? Fair.
BOWN: Any problem he sees out there, he's got a solution for it. And that solution is tariffs.
VANEK SMITH: He's got a fever and the only...
(LAUGHTER)
BOWN: That's the medicine.
VANEK SMITH: The only medicine is more tariffs.
BOWN: Yeah.
VANEK SMITH: OK.
BOWN: Well, I mean, there's something to that. I mean - and so I think that's the really big concern here is, you know, Boeing sells a lot of aircraft to Europe. And if President Trump is going to now, you know, be so fed up with these European subsidies that he's going to impose tariffs on Airbus - you know, the A380 or something coming into the United States - what's to stop the Europeans from doing the same thing for all of those Boeings that are sold to, you know, to Air France or to KLM or to Lufthansa? You know, they're going to hit as well.
VANEK SMITH: And then there's going to be less cheese in our lives probably.
BOWN: There - you know, the other thing here - the list of products included not only aircraft, so the big, big products on the list as - you know, $9 billon on aircraft...
VANEK SMITH: I know. Those are the bigger-ticket items on the list. I know, like...
BOWN: But the more exciting ones absolutely are the wine and cheese. And this is...
VANEK SMITH: I know - Swiss cheese, pecorino cheese, Gruyere, Roquefort. Olive oil's on the list.
BOWN: Olive oil's on the list. But the cheeses...
VANEK SMITH: Wine.
BOWN: ...Are the reminiscent ones, right? We used to - in the good, old days, when the WTO system really worked and we just had - liked to have little, minor trade disputes with countries, this is what we would retaliate over in the United States.
VANEK SMITH: It's like, we're going to put a tariff on Roquefort cheese. Take that.
BOWN: Exactly. That's what used to happen in the good, old days. So if we could limit it to that kind of thing today, I think it would be OK. If it does escalate and really does hit aircraft, then I think it is a whole nother story. You know, that then likely leads to retaliation by the Europeans. It probably then begins to affect jobs in manufacturing industries on both sides of the Atlantic. And this makes it, you know, a much bigger deal in terms of the international trading system and, really, problematic relations, I think, between the United States and Europe into the future.
VANEK SMITH: Like, overall with all these tariffs, I mean, what effect is this having on our economy? I mean, there's a lot of things sort of being threatened. There are some things in place with Europe, with China, with Mexico and Canada. What effect has this had? I mean, has it been, like, a really solid economic effect. Has it been more of a - kind of a political effect - affected our image in the world?
BOWN: So the results so far - so President Trump, in 2018, essentially imposed tariffs on five different sets of products. There was solar panels and washing machines. There was steel and aluminum. And then there were the big tariffs on China. And so far, the estimates are that they have protected some sectors. So if you're, you know, in the steel sector, you like them. You're doing better.
But for everybody else, they're hurting a little bit. They're paying slightly more for the products that they buy. If you're workers in other sectors, you know, like the car parts sector that, say, has to use that steel or that aluminum to be able to make the products that you buy, you're going to suffer. And when you add up all of those things, everybody seems to be suffering a little bit because of the tariffs. That's not good news for the U.S. economy.
Now, the rest of the American economy seems to be going OK. So I think it's being - it's overshadowing the negative impact of these tariffs. But as the rest of the economy sort of begins to slow down, I think we are likely to see, if these tariffs remain in place, more negative effects starting to show up in sort of people's everyday lives.
VANEK SMITH: Chad Bown with the Peterson Institute, thank you so much.
BOWN: Thanks for having me.
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VANEK SMITH: This episode of THE INDICATOR was produced by Darius Rafieyan, edited by Paddy Hirsch. Our intern and fact-checker is Willa Rubin. And THE INDICATOR is a production of NPR.
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