By Emre Peker in Brussels and Josh Zumbrun in Washington, D.C.
The U.S. plans to swiftly impose tariffs on $7.5 billion in
aircraft, food products and other goods from the European Union
after the World Trade Organization authorized the levies Wednesday,
citing the EU's subsidies to Airbus SE.
The new duties represent the most significant trade action
against the EU since the Trump administration hit the bloc with
steel and aluminum duties last year, and could further sour
relations between allies that have long sought to resolve trade
disputes without resorting to tariffs.
"I'm tempted to say it will poison the well on other U.S.-EU
trade issues, but the well is pretty poisoned anyways," said
William Reinsch, a senior adviser at the Center for Strategic and
International Studies in Washington. The Trump administration
"wants to watch the Europeans squirm for a while," he said.
The Office of the U.S. Trade Representative said it would impose
the tariffs starting Oct. 18, with 10% levies on jetliners and 25%
duties on other products including Irish and Scotch whiskies,
cheeses and hand tools.
The U.S. was authorized to impose tariffs of up to 100% on $7.5
billion of goods by the WTO in what has been a 15-year battle over
support programs for Airbus and U.S. aerospace rival Boeing Co. The
latter had pushed for a 100% duty on Airbus jets.
The global trade regulator had already determined that both
aircraft makers received illegal government subsidies, with the
case against the Airbus subsidies moving through the WTO system
first.
"For years, Europe has been providing massive subsidies to
Airbus that have seriously injured the U.S. aerospace industry and
our workers," U.S. Trade Representative Robert Lighthizer said in a
statement. "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."
Following the decision, Airbus called on Washington and Brussels
to avoid tariffs that would "severely impact" the aircraft
industry, hurt U.S.-EU trade relations and damage the global
economy.
Duties would raise costs for airlines on both sides of the
Atlantic and hit a U.S. supply chain employing 275,000 people and
generating billions of dollars in revenue annually, the European
plane maker said.
"Airbus is therefore hopeful that the U.S. and the EU will agree
to find a negotiated solution," Chief Executive Guillaume Faury
said in a statement. The aircraft maker, which risks losing sales
if tariffs take hold, sources some 40% of its parts from the U.S.
and has a plant in Mobile, Ala.
Boeing accused Airbus of refusing to comply with WTO rulings in
the long-running case and pushing the U.S. toward placing tariffs
on European exports.
"Airbus could still completely avoid these tariffs by coming
into full compliance with its obligations," the Chicago-based
company said. "We hope it will finally do that."
U.S. carriers with Airbus fleets said the levies could lead to
higher fares and threaten jobs.
"Imposing tariffs on aircraft that U.S. companies have already
committed to will inflict serious harm on U.S. airlines, the
millions of Americans they employ and the traveling public," Delta
Air Lines Inc. said.
The WTO is set to rule on Boeing's subsidies early next year, at
which point the EU will be authorized to strike back with tariffs
of its own.
An eight-page list of the goods facing 25% tariffs published
Wednesday by the USTR includes a wide assortment of popular
European foodstuffs such as coffees, olives, cheeses, liqueurs and
cordials. Industrial goods making the list include
electromechanical tools and backhoes.
Other tariff threats loom over the EU. President Trump is poised
to decide by Nov. 13 whether to tax cars and auto parts from
Europe, risking a rapid escalation of duties on trans-Atlantic
automotive trade worth some $100 billion. Leaders of a new EU
administration, slated to take office Nov. 1, have urged Mr. Trump
to avoid a trade war.
Washington is able to move quickly because it had previously
published a list of up to $21 billion of European goods that were
candidates for tariffs. Brussels has a $20 billion list of U.S.
exports to target.
"If somebody is imposing tariffs on our aviation companies, we
will do exactly the same," European Commission President
Jean-Claude Juncker said Wednesday evening in Brussels at an event
held by the American Chamber of Commerce to the European Union.
EU Trade Commissioner Cecilia Malmström said the U.S. hasn't
responded to an EU proposal from July for a comprehensive plan to
regulate subsidies for the civil-aircraft industry and establish a
global framework.
A senior USTR official said Europe hadn't reached out for
negotiations until last month, adding that the U.S. hopes the new
tariffs will bring Europe to the table.
A U.S.-EU fight at a time Russia and China are subsidizing their
aircraft makers to compete with the world's two biggest plane
manufacturers would be counterproductive, European officials
said.
Europe could consider imposing tariffs before pursuing a broader
settlement and even before the WTO rules on its case against
Boeing, according to EU diplomats.
To avoid doing nothing until that WTO ruling, the EU is
considering revoking a settlement with the U.S. from 2006 over tax
exemptions for international sales structures used by Boeing and
other U.S. companies known as foreign-sales corporations.
Such a move could affect some $4 billion worth of U.S. exports,
but also risks unraveling decades of similar trade settlements.
"You have to look at it from a tactical point of view," an EU
diplomat said. "We bring it to the table to highlight all our
options and create some leverage, but our line has been to just
settle it with a negotiated solution."
While the EU hasn't yet decided on its immediate response,
officials acknowledge that revoking old rulings might backfire --
and even trigger the car tariffs Washington is pondering. It is
within the EU's right to revoke a prior settlement, although it
would be unusual.
During his confirmation hearing Monday at the European
Parliament, Phil Hogan, the EU agriculture commissioner who has
been tapped as trade chief for the incoming administration, said
"it doesn't make sense" for the U.S. to shun EU proposals to settle
the Airbus and Boeing disputes, especially since Brussels would
soon be able to hit back against Washington's tariffs.
"It takes two to tango, and I'm ready to engage politically with
the United States to resolve our trade differences," he said.
--Doug Cameron in Chicago and Dan Michaels in Brussels
contributed to this article.
Write to Emre Peker at emre.peker@wsj.com and Josh Zumbrun at
Josh.Zumbrun@wsj.com
(END) Dow Jones Newswires
October 02, 2019 20:42 ET (00:42 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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