The U.S.-EU trade war continues to brew and could see Brussels and Washington move forward with more tariffs through the rest of the year, even as both sides reckon with the economic fallout from the COVID-19 pandemic. 

• On June 24, the U.S. Trade Representative's office published a list for the public comment outlining $4.3 billion worth of European products that could be subject to new tariffs as early as August. 
• The products include olives, chocolate and gin from countries such as France, Germany, Spain and the United Kingdom. 

This latest escalation is part of its 16-year dispute between Washington and Brussels over government subsidies to the U.S.-based aircraft maker Boeing and its chief European rival, Airbus.

• The United States has been conducting a review of its original round of tariffs on $7.5 billion worth of European imports since they went into effect in October 2019. Washington imposed the tariffs after the World Trade Organization (WTO) sided with the United States over European subsidies for Airbus, and ruled it could target goods from EU countries with tariffs.
• In a similar case involving U.S. subsidies for Boeing, the European Union is set to move forward with tariffs on $11.2 billion worth of U.S. imports once the WTO finishes its process of reviewing and approving EU tariffs on the United States, likely in September or October.

There is a high likelihood that the United States and the European Union will move forward with their respective tariffs by the end of the year. 

• Trade negotiations between the United States and European Union have already been virtually non-existent this year, due in part to the pandemic, as well as major disagreements on issues such as agriculture. 
• Even if they do occur, last-minute trade talks to try to avert the escalation over aircraft subsidies will thus likely fail, as both sides are highly unlikely to reach a trade deal before the WTO authorizes Brussel to impose its reciprocal duties on U.S. imports. 

The implementation of new tariffs by the United States and the European Union could spark another round of tit-for-tat tariff escalations on their other trade issues.

• In the coming weeks and months, EU-U.S. trade relations will likely continue to worsen over immigration issues and travel bans due to COVID-19.
• Over the past three years, U.S. President Donald Trump has continued to threaten the European auto industry with 25 percent tariffs as well. Such tariffs, however, are unlikely as they would be particularly damaging to European automobile manufacturers who have moved some of their operations to the United States.
• The United States has also begun the process to impose tariffs on European countries who have either adopted or proposed digital services taxes (DSTs), which Washington argues unfairly target U.S. tech companies such as Amazon and Google. The Trump administration's 2019 investigation into France's new DST already found the tax discriminates against U.S. companies, meaning Washington could theoretically move forward with its threatened tariffs against Paris at any time.

The trade dispute between Washington and Brussels, however, will still remain far smaller in scope than the U.S.-China trade war. 

• To limit further economic disruption in light of the COVID-19 crisis and upcoming U.S. elections, the United States is likely to only slowly implement new duties on EU imports. 
• Unlike its dispute with China, the United States does not have the same level of concern about the structure of European economies and them not behaving like market economies.
• But even in the most extreme scenario, where Washington follows through on its myriad of threatened tariffs on EU imports (including those targeting Airbus, automobile manufacturers and countries with DSTs), the total amount of goods covered would still probably fail to reach $100 billion. Current U.S. tariffs on China, by contrast, cover nearly $400 billion worth of Chinese imports.