US to slap tariffs on EU following WTO Airbus ruling
October 2, 2019
Aircraft and agricultural items from Europe will be subject to US tariffs in the latest round of a long legal fight. The move sets the stage for tit-for-tat trade escalation between the US and the EU.
The United States will impose tariffs on $7.5 billion (€6.8 billion) worth of European imports in retaliation for illegal EU subsidies to airplane maker Airbus.
The announcement came hours after the World Trade Organization (WTO) on Wednesday ruled on a 15-year-old case that the US could impose $7.5 billion in retaliatory tariffs in response to illegal EU subsidies to Airbus that hurt its American rival Boeing.
Washington plans to impose a 10% tariff on aircraft imported from Europe and apply a 25% import tax on other agricultural and industrial items on October 18, the Office of the US Trade Representative said in a statement.
France ready to respond 'with sanctions'
The French government said it was prepared to retaliate, but that the response to the US tariffs must be agreed within the EU.
"If the American administration rejects the hand that has been held out by France and the European Union, we are preparing ourselves to react with sanctions," French Finance Minister Bruno Le Maire said on Thursday.
The EU's top trade official earlier said the bloc was considering countermeasures, but that it prefers a negotiated settlement.
"If the US decides to impose WTO authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same," European Commissioner for Trade Cecilia Malmstrom said in a statement.
The aim of imposing tariffs is to persuade the EU to reach a negotiated settlement, the trade office said.
"For years, Europe has been providing massive subsidies to Airbus that have seriously injured the US aerospace industry and our workers," US Trade Representative Robert Lighthizer said in a statement.
"We expect to enter into negotiations with the European Union aimed at resolving this issue in a way that will benefit American workers," he said.
The list of goods primarily targets imports from France, Germany, Spain and the United Kingdom, which are the four countries providing Airbus with subsidies. They include everything from sausages and cheese to cookies and camera parts.
The WTO had approved up to 100% tariffs, but the US decided to limit the tax.
The $7.5 billion represents a small chunk of EU's $688 billion in exports to the United States, but US airlines have warned the tax on aircraft would increase costs and advised that it should not be applied to existing orders.
Long-running case, far-reaching consequences
Although the US tariffs are allowed under international trade law, the move may set off a tit-for-tat escalation with the 28-member bloc at a time of trans-Atlantic trade tensions, uncertainty over Brexit and a trade war between Washington and Beijing that has rattled global markets.
German Chancellor Angela Merkel recognized "we have lost a matter under WTO law."
"This means it's not some sort of arbitrary question but a verdict according to international law that now weighs on Airbus, one must sadly say," she told reporters in Berlin earlier Wednesday. "We have to see how the Americans will react now."
Tit-for-tat? Not quite...
Under WTO law the EU is not allowed to impose retaliatory countermeasures in response to the ruling, but another case may allow it to impose its own tariffs.
The WTO has already found Boeing received billions of dollars of illegal subsidies in a case dating back to 2005 and trade arbitrators are expected later this year to allow the EU to impose its own retaliatory tariffs on US imports.
The world's two largest plane makers have been locked in a dispute at the WTO since 2004, when the US challenged cheap European loans to Airbus, which is jointly owned by Germany, France, Spain and Britain's BAE System.
Separately, the WTO is reviewing US tariffs on steel and aluminum that the Trump administration imposed on national security grounds. The EU says the tariffs are protectionism and imposed its own retaliatory tariffs. The Trump administration is also threatening to impose tariffs on the European automobile sector.