Quarrel threatens main artery of world trade

BRUSSELS » The trade wars threatening to push the global economy into recession are entering a new phase, with the United States and European Union escalating a dispute that endangers the world’s biggest trade relationship.

After the Trump administration slapped steep tariffs on $ 7.5 billion in EU goods, mainly traditional produce such as cheese and wine, the Europeans made clear they would retaliate in kind. Some fear the tariffs could ultimately lead to U. S. taxes on European cars, a big economic blow that President Donald Trump has been threatening to deliver for months.

The exchange echoes how the U. S. and China ratcheted up a tariffs fight in recent months that has bruised businesses around the globe and stunted economic growth.

“This step triggers fears of a new round of escalation of tariff wars,” said Alex Kuptsikevich, a financial analyst with brokerage FxPro. “The introduction of tariffs and fears of tit- fortat steps could further suppress business sentiment, which is already at the lowest levels for years.”

The Trump administration’s latest tariffs target large aircraft but also many typical European products such as olives, whiskey, wine, cheese and yogurt. They take effect Oct. 18 and amount to a 10% tax on EU aircraft and a steep 25% rate on everything else.

The U. S. got the legal goahead Wednesday from the World Trade Organization in a case involving illegal EU subsidies for the plane maker Airbus, which predates the Trump administration.

But the EU is expecting a similar case involving U. S. subsidies for Chicagobased Boeing to go in its favor, with a ruling due in coming months. It has said it hopes the two sides can hold off new tariffs, which amount to taxes on domestic importers. Sometimes importers pass on the higher costs to consumers, making goods more expensive.

“If the U. S. imposes countermeasures, it will be pushing the EU into a situation where we will have to do the same,” said European Commission spokesman Daniel Rosario, echoing the dark outlook expressed by many EU governments.

“This is a move that will first and foremost hit U. S. consumers and companies and will make efforts towards a negotiated settlement more complicated,” he said.