American products such as cranberries, orange juice, whiskey and tobacco were targeted by the European Union leaders after the United States imposed tariff on steel and aluminum and the EU was trying to avoid the tariffs earlier this year.
And the list of 106 U.S. products that was taken out by China as a retaliatory list for the planned additional tariffs by the Trump administration also have the same four products – cranberries, orange juice, whiskey and tobacco.
Why target these four products – and more specifically cranberries and whiskey?
According to experts, there has been careful selection and a lot of consideration behind what appears to be a random list of products on both occasions. The selection has been made in such a way that politicians in Washington are brought under pressure both politically and economically so that they are forced to reverse the decisions.
“Everybody looks at this very scientifically, and they have a lot of political science in this,” said Ross Denton, a partner and trade specialist at the law firm Baker McKenzie.
The process of modern trade retaliation system was pioneered by the EU, according to him. The process involves first carrying out a carful identification of those products that are amongst the most important for a target economy and then “cross reference that with where they think the most political pain will be caused.”
The economic impact of tariffs on consumers back in the home country of the products is the primary consideration when narrowing down a broad list of potential targets in such a counter trade retaliation.
“They definitely do look at the impact on the consumer,” said Denton. “They always try to make sure there’s an alternative supply for [their] consumers.”
So why cranberries and whiskey?
Over half of the cranberries produced in the world comes from the U.S., state of Wisconsin where Donald Trump found significant support during the 2016 presidential elections. It is also the home state of the top Republican in the US House of Representatives – Paul Ryan.
According to the US Department of Agriculture, 15 per cent of the total cranberries export of the U.S. goes to China worth $50 million. 38 per cent US exports of cranberries is done to the European Union worth $130 million.
Ryan, and other Republicans in Wisconsin would come under political pressure because of public threat of retaliatory tariffs from China and the EU. there might even be pressure exerted on Trump by those Republicans.
“Trading partners are trying to understand how to influence President Trump,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics. “There really is no definitive tried-and-true track record that we think could ‘work.’ ”
On the other hand, American producers can be seriously hurt by a tariff on whiskey. Alternative sources for premium whiskey such as Ireland, Scotland or Japan can be utilized by whiskey consumers in China and the European Union.
The tariff threats ultimately hope that some pressure on Trump can be exerted by multiple Republicans because of the tariffs, Bown said.
“President Trump is a very different kind of president. It’s really unclear … who he listens to for policy advice,” he said.
(Adapted from Money.cnn.com)