Trump Threatens EU With Tariffs Over Airbus Subsidies

Trump’s twitter outburst rattled a fragile truce between the EU and the United States. President Donald Trump had sparked outrage in Europe last year by imposing steep duties on steel and aluminum and threatening new ones on autos.

“The World Trade Organization finds that the European Union subsidies to Airbus has adversely impacted the United States, which will now put Tariffs on $11 Billion of EU products!” Trump tweeted.

“The EU has taken advantage of the US on trade for many years. It will soon stop!” Trump’s remarks were likely to raise the temperature for US and EU negotiators, who have been meeting since last year ahead of proposed trade talks to resolve the dispute.

Oh, good – another trade war https://t.co/WPni6jRZJt

— Paul Krugman (@paulkrugman) April 9, 2019

The threatened US tariffs are in response to subsidies received by aircraft maker Airbus and target a host of European products including helicopters, aircraft parts and gouda cheese.

However, the immediate consequences of Trump’s remarks were unclear. Hours earlier, on Monday evening, US Trade Representative Robert Lighthizer had said the final amount of any tariffs had yet to be determined and would not be announced until the outcome of a WTO arbitration process — expected later this year.

For more than 14 years, Washington and Brussels have accused each other of unfairly subsidizing Boeing and Airbus, respectively, in a tit-for-tat dispute that long predates Trump.

The Boeing-Airbus spat is the longest and most complicated dispute dealt with by the WTO, which aims to create a level playing field in global trade.

Lighthizer said Monday the World Trade Organization had repeatedly found European subsidies to Airbus harm the United States.

“This case has been in litigation for 14 years and the time has come for action,” Lighthizer said in a statement.

“Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft. When the EU ends these harmful subsidies, the additional US duties imposed in response can be lifted.”

EU Hits Back

The EU fired back on Tuesday, saying that the amounts claimed by Washington were “greatly exaggerated.”

“The figure quoted by USTR is based on US internal estimates that have not been awarded by the WTO,” a commission official said.

Photo: Shutterstock

Both sides agreed that the size of the duties was subject to arbitration at the WTO, the result of which was expected in the summer. And both aviation giants have scored points along the way in the marathon dispute.

The WTO ruled in March 2012 that billions of dollars of subsidies to Boeing were illegal and called on the United States to end them.

But a few months later, the European Union filed a new complaint, alleging Washington was not complying with that order.

In a split ruling published in June 2017, the WTO said the United States had mostly brought programs into compliance but agreed that Washington had not taken “appropriate steps to remove the adverse effects or … withdraw the subsidy” in one case.

Brussels was also reprimanded by the WTO during the Airbus-Boeing row, and the United States asked the WTO to determine the amount it could impose in sanctions against the European Union for failing to remove subsidies.

Transatlantic Tensions

USTR said Monday that once that report is issued, it would announce a finalized product list.

Airbus in a statement said the list was “totally unjustified,” while archrival Boeing said that it supports Washington’s “ongoing efforts to level the playing field.”

“Boeing has consistently supported US compliance with WTO rulings. It’s now time for the EU to follow that example and end all illegal government support for Airbus,” Boeing said.

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The revived spat comes at a sensitive time for transatlantic relations. Trump and EU Commission President Jean-Claude Juncker in July agreed to launch trade talks and refrain from imposing further tariffs in a bid to cool tensions.

“I plead for an amicable agreement,” French Finance Minister Bruno Le Maire said at a news conference in Paris. “When I look at the growth situation worldwide, I cannot believe we can allow a trade conflict, even in the sole area of aeronautics, between the United States and Europe,” he added.

The tariff threat also comes at a critical time for Boeing, caught in a crisis over its 737 MAX aircraft, grounded over safety fears following two fatal accidents.