Trump's other trade war could hit European cheeses and olive oil

The steady stream of customers walking into Di Palo's on a recent afternoon were greeted by giant cheese wheels, meat hanging from the ceiling and bottles of...

Posted: Sep 7, 2019 10:35 AM

The steady stream of customers walking into Di Palo's on a recent afternoon were greeted by giant cheese wheels, meat hanging from the ceiling and bottles of olive oil lined up on the shelves -- a century-old array that's at risk because of President Donald Trump's trade wars.

Most of the products sold at the 109-year-old specialty shop in Manhattan's Little Italy neighborhood are from the old country, and attract customers from all over. The store has lasted through two world wars and the Great Depression. But because of a Trump administration fight with the European Union, Di Palo's customers could soon be paying up to double the price, testing their loyalty.

The Trump administration has proposed a tariff of up to 100% on $25 billion in European items. Romano, Parmesan, provolone and Gouda are all on the list. But it's not just cheese. The tariff is proposed to hit a variety of items that pair well with cheese, as well -- like wines and meats, olive oil, olives and pasta.

While Trump's tariffs against China threaten to raise prices on an array of consumer goods, this lesser-known trade dispute has cheese lovers up in arms and cheese sellers like Lou Di Palo worried about how potential new tariffs could hurt sales.

Di Palo says the tariff could hit about 95% of the items his store sells, and he's skeptical that customers will pay double for everything. He plans to take a hit to his profit margins rather than raise prices to cover the cost of the tariff.

"Products that we sell are already kind of expensive. For instance, Parmigiano Reggiano and Grana Padano. These are cheeses that sell between $15 and $20 a pound. Could I get $30 and $40 a pound for this cheese? It's going to be very difficult," said Di Palo, who works behind the counter with his brother Sal and sister Marie at the store, which was opened by their great-grandfather.

The kicker for Di Palo and other importers is that the trade dispute has nothing to do with food. Instead, it's part of a 15-year-long issue over subsidies for aircraft makers Boeing and Airbus. Both the US and the EU have been found at fault -- and both are threatening tariffs on a wide range of other goods in retaliation. It's up to the World Trade Organization to determine the scope of allowable duties. A decision is expected sometime this month, and it has importers on the edge of their seats.

Di Palo worries that such high duties could make it difficult for his family business to survive.

"Could this be, excuse the expression, the straw that breaks the camel's back, and my children and my sister's children say it doesn't pay to be here anymore?" he said.

About 14,000 specialty food retailers, along with 20,000 other food retailers across the country, would be affected by the tariffs, according to the Specialty Food Association.

Food importers are worried, too. If sales go down, they'll be doing less business.

"100% duties would be really devastating. We're going to make these items so expensive and so unmarketable we won't import them anymore," said Tom Gellert, principal of the Gellert Global Group, which owns five US-based food importing companies and employs more than 500 workers across dozens of states.

If the tariffs are imposed, people like Gellert still don't know when they'll go into effect, and can't be sure what items will be hit or at what rate.

"The uncertainty alone is already frustrating. It's very difficult to budget when we don't know what the cost of our products is going to be," he added.

Supplies of olive oil could get low. The United States produces just about 5% of what Americans consume. A bipartisan group of lawmakers has already pleaded with the US Trade Representative's Office to reconsider imposing a tariff on the oil.

On the other hand, the tariffs may benefit American producers who make domestic versions of cheeses that are thought of as quintessentially Italian, like mozzarella and burrata.

But when it comes to the cheese-obsessed, the region where it's made and the cow's or goat's milk used make all the difference.

If the tariffs go into effect, Di Palo says, he may start selling more American-made cheese as an alternative to what will become a more expensive Italian product.

"I will tell you this," he said. "As long as the door of Di Palo's is open, it's going to maintain the traditions of my great-grandfather and grandparents. We are going to have the authentic products of Italy. The authentic wines of Italy, the authentic cheeses, oil, salumi. This is very important to us."

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