Lawyers: Retaliation Certain If US Tariffs Come; EU Won't Allow Offshoring to Avoid

Attorneys from the U.S., Canada, Mexico, China, Great Britain, Brussels, Brazil, Argentina, South Africa and the United Arab Emirates talked about what they expect to happen if threats become reality. In short, retaliatory tariffs will be likely, though what products are targeted could shift, since Wisconsin and Kentucky are no longer the home states of the House and Senate leaders.

A lot is unclear about what tariffs might get hiked, and by how much. Trump has threatened an additional 60% tariff on Chinese goods, but more recently he floated a 10% tariff. Trump also threatened 25% tariffs on Mexican and Canadian imports, then sounded like he was satisfied with Mexico's response, but not Canada's (see 2412090026). (One of 4,000 viewers of the webinar asked if the 25% is on top of the duty-free status, or on top of the most-favored-nation tariff. The lawyers said they didn't know.)

Baker McKenzie lawyer Chandri Navarro noted that Mauricio Claver-Carone, one of the transition advisers and Trump's former senior director for Western Hemisphere Affairs at the National Security Council, said that the 60% tariff on Chinese goods also would apply to goods shipped from Chinese-owned ports in Latin America, such as the new port in Peru.

"We are very interested to see more information regarding that possibility," she said.

Francisco Negrao, a Trench Rossi lawyer in Brazil, said that if there are tariffs for goods that transit through that Peruvian port, it could affect more than just Peruvian exports to the U.S. -- it could affect Ecuador, Bolivia and Argentina.

Negrao said it's not clear if there will be a tariff on Brazilian exports, whether from a global tariff, or to punish Brazil's attempts to de-dollarize.

But he said it's safe to predict that Latin America as a whole will have "strained trade relations, maybe except for Argentina."

He added that Trump might want to renegotiate the free trade agreement with Colombia.

Bregt Natens, Baker McKenzie counsel in Brussels, said that the EU and the U.K. won't want a tit-for-tat tariff hike if they are hit by Trump, for fear it would hurt their economies. He said we should expect to see Europe offer concessions to Trump, either by granting exceptions to EU regulations, or by promises to buy American exports, or both. In exchange, Europe will expect either quotas or exceptions to the tariffs, he said.

But even if the EU does avoid a blanket 10% or 20% tariff, Natens wondered if retaliation could return, because the truce over Section 232 tariffs on European steel was never resolved during Joe Biden's administration. The EU isn't satisfied with the tariff rate quotas that replaced 25% tariffs on steel, and if those remain under Trump, the EU might impose tariffs on some products. Which ones? "A very closely guarded secret; there have been no leaks at all," Natens said.

Last time, the EU chose Kentucky products, like bourbon, and Wisconsin products, like Harley-Davidson motorcycles.

Jessica Mutton, a Baker McKenzie lawyer based in the U.K., noted that last month, the Court of Justice, the EU’s highest court, rejected Harley-Davidson's argument that its motorcycles from Thailand shouldn't be subject to those retaliatory tariffs. The EU customs authority had said the motorcycles would be of Thai origin, but the European Commission ordered it to reverse that decision, arguing that shifting production from the U.S. to Thailand "amounted to circumvention."

The court said Harley-Davidson's principal intent was to avoid the 25% punitive tariff (the company itself had made an SEC filing saying the shift was done to avoid the tariff burden).

"This ruling could significantly hinder companies' ability to move production out of the U.S." to avoid retaliation, Mutton said. "We expect this ruling will be equally applied in the U.K."