France risks losing 2.5 billion euros in exports, and more than 45,000 jobs in the wine and luxury sectors. This disaster scenario, exposed by the economist study office Asterès in a note published on June 22, could be the very real result of the policy of increased customs tariffs of Donald Trump, if the European Union cannot obtain commercial peace with the United States by the end of the tariff break, fixed on July 9.
With the cosmetics and leather goods sector (leather, luggage, shoes), the wine sector and its 3.7 billion euros in annual exports to the United States could be “the hardest hit”, with up to 14,000 threatened jobs, including 3,600 direct jobs, according to the note.
“Prudent” scenarios
Two scenarios are envisaged by the note. In the worst case (the consequences of which are exposed above) the American customs duties on these products are increased to 50 % by the Trump administration. In the other scenario, customs duties reach only 20 %, causing 1 billion euros in export losses and the disappearance of around 17,000 jobs.
Asterès economists – study cabinet of the chronicler of L’Express Nicolas Bouzou – “emphasize that these estimates are cautious, based on conservative hypotheses of elasticity price and maintenance of the offer. In reality, the behaviors of purchase of consumers and distributors could amplify the negative effects”.
To compensate for the devastating effects on their companies, some large luxury bosses already warn. “We do not adjust our industrial policy with customs duties. When they increase, we will increase our prices,” said Axel Dumas, manager of Hermès, mid-February when presenting his annual results. Same bell at LVMH. “We are considering price adjustment measures in the event of an increase in American customs duties,” said Echos Deputy Managing Director Stéphane Bianchi.
Climbing logic
To avoid a scenario with catastrophic damage to the economy and French jobs, Asterès makes several recommendations. First, the abandonment of a logic of commercial climbing: that is to say, stop replicating by a mirror increase in customs duties imposed by Donald Trump. For the time being, the trend is however at the “eye for eye, tooth” strategy.
Last March, Washington announced 25 % customs duties on European steel and aluminum, triggering a strong reaction from Paris which denounced “brutal” measures and agitated the threat of reprisals. In response, the EU has prepared reprisals on 26 billion euros in American products. To which Donald Trump replied with a general increase at 20 % of customs duties for the EU, also threatening to impose a surcharge of 200 % on French wine and spirits. Brussels adopted countermeasures up to 21 billion euros on April 9, pushing Donald Trump to announce a final increase at 50 % of prices on all European products.
A telephone exchange between the President of the United States and Ursula von der Leyen finally allowed a truce in the trade war and a suspension of pricing increases until July 9, leaving the two continents time to negotiate. But Donald Trump has already dismissed the possibility of a “zero for zero” agreement as proposed by the president of the European Commission in April, and the tensions remain lively.
Invest in the resilience of the sectors
In the least threatening scenario – an increase to 20 % of customs duties – the cosmetic industry would be a 10 % drop in exports resulting in the abolition of more than 5,000 jobs. The wine sector would lose 11 % of its exports (or 8,000 jobs removed) and that of leather goods almost 10 % (or 3,900 less jobs). In the case of a 50 % customs duties scenario, these figures triple.
In this perspective, another measure is recommended by economists to qualify the effect of Trump policy: the implementation of a “support strategy for the sectors exposed and a diversification of commercial outlets, rather than the adoption of reprisal measures”. And this in particular through the search for new partners, but also the strengthening of cooperation with historical partners. Faced with the urgency of this offensive American trade policy, “Europe would have more to be won by investing in the resilience of its exporting sectors by engaging in a business war with deleterious effects,” said the note.
