US to put tariffs on Europe planes, beverages after WTO ruling

The US plans to impose a 10 per cent tariff on large civil aircraft from France, Germany, Spain and the UK. It will also slap 25 per cent levies on a range of other items including Irish and Scotch whiskies; wine, olives and cheese; as well as certain pork products, butter and yoghurt from various European nations, according to the US Trade Representative’s Office.

The US removed leather goods from its original proposed list — among other items — sparing luxury labels such as Givenchy and Louis Vuitton. Wine and spirits are among those affected by the levies.

The new US list does spare some Airbus parts including sections of fuselage that are used to assemble A320s for American buyers at a plant in Mobile, Alabama. State officials in Alabama had lobbied for parts used by the plant to be spared.

Settlement talks

Washington has requested the WTO meet October 14 to formally authorise the tariffs, and the duties would then take effect October 18, according to USTR. The goal of the Trump administration in imposing retaliatory duties is to persuade the European Union to reach a negotiated settlement, according to a senior US trade official who briefed reporters on Wednesday.

“Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies,” 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.”

The ruling Wednesday is a milestone in the WTO’s longest-running dispute that will further test transatlantic relations, which have deteriorated under Trump’s “America First” approach to international ties. It’s also an example of Trump getting a favourable ruling from an organisation he has threatened to pull out of.

The US is already in a trade war with China, and any wider flare-up of tit-for-tat tariffs with Europe could threaten a fragile global economy. The WTO on Tuesday cut its trade growth forecast for this year to the weakest level in a decade, warning against a “destructive cycle of recrimination.”

The Trump administration had been considering a particularly damaging trade weapon known as “carousel” retaliation, which would enable the US to regularly shift around the targeted goods, people familiar with the deliberations said last month. That would increase trade uncertainty and pain for European businesses.

A senior USTR official who briefed reporters on Wednesday said that the Trump administration has the authority to periodically revise the retaliatory targets and tariff rates.

Inflict damage

The EU will retaliate against any Airbus-linked tariffs when the WTO rules early next year on the bloc’s dispute over US subsidies to Boeing, according to European Trade Commissioner Cecilia Malmstrom.

“The mutual imposition of countermeasures, however, would only inflict damage on businesses and citizens on both sides of the Atlantic, and harm global trade and the broader aviation industry at a sensitive time,” Malmstrom said, adding that the bloc is ready to work with the US on a “fair and balanced solution for our respective aircraft industries.”

Airbus warned in a statement that tariffs on its aircraft and components would come as a blow to the US aerospace industry, with some 40 per cent of its procurement coming from American suppliers.

The company also urged the Trump administration to take account of the forthcoming WTO decision on Boeing, saying those reciprocal tariffs could exceed the value of the US sanctions. Chief Executive Officer Guillaume Faury repeated calls for a negotiated settlement to the dispute.

The WTO has repeatedly ruled that Toulouse, France-based Airbus unfairly benefited from launch aid loans and other trade-distorting subsidies for two Airbus models, the A380 and A350WXB.

“Europe is facing tariffs today because Airbus has refused for years to comply with WTO rulings,” Boeing said in an email. “Unfortunately, Airbus’s non-compliance will negatively impact European Member States, industries, and businesses completely unrelated to Airbus’s actions, as well as Airbus’s airline customers.”

For its part, Airbus noted that in a few months, “the WTO will give the EU its own basis on which to seek countermeasures against the US. The amount of the EU’s countermeasures may equal or exceed the countermeasures authorised by the WTO to the US,” company spokesman Clay McConnell said in a email statement.

Political Error

The Trump administration wants to see an end to the EU subsidies in question, which Boeing and the US claim give Airbus an unfair advantage in the highly competitive international passenger aircraft market.

French Finance Minister Bruno Le Maire says the best solution would be one that lowers tensions, but warned the EU would respond “firmly” if the US imposes tariffs.

“If the US chooses to impose sanctions, it would be an economic and political error,” he said.