Trade wars have a way of pitting very disparate products against each other.
Former Pennsylvania Congressman Lou Barletta warns that tariffs over airplanes could bounce back on antipasto, fuselages could drive up the price of fusilli.
The Republican gathered owners of local Italian food businesses to weigh in on the costs of tariffs imposed last year, and to try to sound the alarm about another potentially more punishing round, all stemming from a dispute about airplanes.
“The president is right: punish the bad actors. But Italy isn’t one of them. What does pasta have to do with Airbus?” said Barletta from the dining room of Gran Caffe L’Aquila, a cafe and specialty food store in Philadelphia’s Rittenhouse neighborhood.
The United States and Europe have a long-standing feud over airplanes. Each side has accused the other of unfairly propping up its airplane company through subsidies. Boeing is the American company in question and Airbus is the European one.
In 2019, the World Trade Organization ruled in favor of the U.S. and authorized retaliatory tariffs on imports from the European Union valuing $7.5 billion. Following that announcement, the U.S. Trade Representative issued on a 10% tax on aircrafts, and a 25% tax on certain consumer products in October.
In Italy, table staples like Parmigiano Reggiano and Grana Padano took a hit. (Italian cheesemakers were not pleased.) In the UK, it was single malt scotch.
At Gran Caffe L’Aquila, local business owners shared fears that the tariffs would escalate. One possibility? Italian food made in more competitive markets could rise up to take the place of Italian-made goods.
“Fake parmesan, fake prosciutto, fake mortadella, basically bad copies made in South America … China’s even doing prosciutto, so God knows,” said the cafe’s owner Ricardo Longo. “The consumer is going to get a product which is much worse … and will be paying the same price.”
Bill DiGiacomo, a Conshohocken-based wholesale distributor of specialty foods, said he stockpiled goods before the last round of tariffs took effect in the fall to keep prices low through the holidays, but has since had to raise them.
“We’ve essentially increased prices to our customers 12 to 15%,” he said, even after businesses eat a portion of the tariff.
If new items are included in the next round of tariffs, or if the amount goes up, “it would be potentially devastating,” said Giacomo.
Further up the supply chain, producers in Italy are being affected. Italian food retailers the DiBruno Brothers source 60% of their food from that country, and say some manufacturers there are no longer willing to send goods to the United States.
“It’s not sustainable for them. The people who produce my jams or my honeys or my olive oils. If those items get these tariffs, it’s going to be costly for them,” said Emilio Mignucci.
The Trump Administration is expected to release a list of items considered for another round of tariffs later this month, said Barletta. An early supporter of President Donald Trump, who failed to unseat incumbent U.S. Sen. Bob Casey in 2018, Barletta now chairs the American Italian Food Coalition, a group of more than 450 manufacturers, distributors and trade associations dealing in imported Italian pasta, biscuits and wafers.
In the first round of tariffs, those goods were not taxed, but they’re back on the table for another round.
Experts say these tariffs could point to a new front in the United States’ ongoing international trade wars. In December, the Trump administration threatened a 100% tariff on sparkling wines in response to France’s digital sales tax, which would have hurt U.S. companies like Facebook, before both sides pulled back. Wines are already taxed under the Airbus tariffs.
Gary Hufbauer, a nonresident senior fellow with the Peterson Institute for International Economics, said cultural products strongly associated with a country are often the ones targeted.
“Those kinds of products that are iconic, they are [the] favorite — and I mean favorite — for tariff actions … [because] you get a lot of bang for the buck,” he said.
These products get attention, without causing backlash for the politicians that promote tariffs, because the goods tend to be on luxury items, rather than staples.
Pennsylvania is no stranger to the aftershocks of trade wars. Steel tariffs have led to layoffs in Mercer County, and fewer cargo ships coming to ports on the Delaware River.
Residents of the commonwealth have ended up paying $742 million in taxes in 2019 due to trade tensions, nearly double the number from the previous year.
While new deals with China, Canada and Mexico have stabilized some trade relationships, ongoing tensions with Europe mean uncertainty continues.
Amato Berardi, chairman of the National Italian American Political Action Committee, predicted the items taxed could spread to other sectors, and pointed to Italian businesses working in Pennsylvania, like Ferrero Rocher, which has facilities in Central Pennsylvania. Italian car company Fiat owns the farm equipment company New Holland Agriculture, which has a factory in Lancaster.
Members of the European Union have said they’ll instate their own tariffs against the U.S. for it’s “illegal subsidies” of Boeing “in due course.”