In Depth

US set to impose tariffs on $7.5bn of European goods

World Trade Organisation ruling is the latest chapter in a 15-year dispute between Boeing and Airbus

The World Trade Organisation (WTO) has judged that the European Union broke its rules in subsidising planemaker Airbus, and has permitted in the process retaliatory tariffs from the US of up to $7.5bn.

It is the “largest penalty of its kind in the organisation’s history” and the latest chapter in a 15-year battle between the US and the EU over illegal subsidies to Airbus and its rival Boeing, says the BBC.

Airbus shares closed down 2% yesterday.

“The WTO’s ruling follows the decision in May 2018 that the EU had failed to eliminate billions in illegal aid to Airbus on two passenger aircraft - the A380 superjumbo and the A350 midsized jet,” says the Financial Times. “The WTO found that loans granted to these programmes by Airbus’s founding countries - France, Germany, the UK and Spain - were given at non-commercial rates that rendered the aid illegal.”

It concluded that Boeing suffered up to $7.5bn in losses annually because of cheap EU loans to its competitor.

“For years, Europe has been providing massive subsidies to Airbus that have seriously injured the US aerospace industry and our workers,’’ said US Trade Representative Robert Lighthizer.

The news comes at a sensitive time for global trade, as only yesterday the WTO released a report sharply cutting its growth forecast for global trade, blaming, primarily, trade war tariff hikes for its pessimism. Stock markets on Wednesday tumbled. In London, the FTSE 100 eradicated all gains made since mid-August, and dropped 237 points to 7,122, falling 3.2%. It was the largest single-day fall since 2016.

But Donald Trump was triumphant. “It was a big win for the United States,” he said at a news conference.

A reporter quickly pointed out that the case was brought well before he took office, but the president was unrepentant. “The wins are now because they think I don’t like the WTO, and they want to make sure I’m happy,” he argued.

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“The targeted imports are worth $7.5 billion - the full amount the WTO authorized,” reports The Washington Post.

They will take effect on 18 October, with 10% for EU aircraft and 25% for everything else. “Gouda cheese, single-malt whiskey and large aircraft are among the European imports the Trump administration plans to hit,” says the newspaper.

According to The New York Times, though, Europe is prepared to fight back with its own raft of levies. “The WTO is considering a parallel case that the European Union has brought against the United States for subsidizing Boeing, and the EU has drawn up its own list of $20 billion in American products that it could tax in response to that case,” it says.

Cecilia Malmstrom, the European Commissioner for Trade, said: “Opting for applying countermeasures now would be shortsighted and counterproductive. Both the EU and the US have been found at fault by the WTO dispute settlement system. 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. Our readiness to find a fair settlement remains unchanged.”

However, she continued: “If the US decides to impose WTO-authorised countermeasures, it will be pushing the EU into a situation where we will have no other option than to do the same.”

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