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  HOME | Business & Economy (Click here for more)

EU Readying Tariffs in Jet Fight with US

BRUSSELS – The European Union is preparing tariffs on $12 billion of United States products over subsidies to Boeing Co., raising the stakes on Donald Trump administration’s plan for punishing the EU’s support to rival plane maker Airbus SE.

Europe’s move came after a US said on Monday it intended to impose tariffs on $11.2 billion of imports from the EU. Brussels’s swift response highlights its resolve to go blow-for-blow with Washington over the matter.

Both are salvos in the two sides’ long-running fight at the World Trade Organization over government subsidies to the jet makers, which dominate the large commercial airplane market. Both the US and EU are starting the process to impose the tariffs, but essentially are staking out what they believe is the appropriate penalty for the other’s trade transgressions.

But the two sides have said they eventually will abide by whatever is decided by the world trade watchdog, which already has ruled some of the subsidies on both sides are illegal and is determining the damages.

EU officials outlined their plan on Friday, according to people familiar with the discussions. Europe identified an initial list of $20 billion worth of US. exports, from which the EU will choose which products to be targeted.

The Airbus-Boeing spat is inching toward a finale after 15 years of WTO litigation.

Judges at the international trade watchdog are expected to determine by midsummer how much the US can retaliate against the EU, based on the harm done to Boeing due to aid given to Airbus. The EU is poised to get an answer from the WTO on its claims by early 2020.

Final rulings on awards for both the US and the EU are expected to be for significantly lower amounts than the damages the parties have claimed. Washington and Brussels can opt for settling their differences without resorting to punitive tariffs, as they have done some cases in the past.

“The EU remains open for discussions with the US, provided these are without preconditions and aim at a fair outcome,” said an official at the European Commission, the EU’s executive and trade authority.

The potential levies upward of $20 billion between the US and the EU could hit a broad cross-section of industries on both sides of the Atlantic. They would also come as Washington and Brussels seek to revamp trade links, following a brief tariff conflict last year.

Trump and EU Commission President Jean-Claude Juncker averted a bruising trade fight with a deal in July, agreeing to slash tariffs and cut red tape to boost trans-Atlantic trade.

Yet on Tuesday Trump hailed the proposed tariffs over Airbus subsidies, after his trade representative said “the time has come for action,” seizing on a longstanding complaint.

“The EU has taken advantage of the US on trade for many years,” Trump tweeted. “It will soon stop!”

In a sign of the broad impact WTO-driven retaliation can have, the US said its proposed list of tariff targets contains not only Airbus aircraft, but also of nonaviation items ranging from cheese to bicycles. The preliminary US list of EU exports is worth about $23.8 billion, almost half of which would be selected and targeted if the WTO grants Washington’s bid for damages in full.

The EU is similarly hunting for American exports that will reverberate beyond Boeing, preferably squeezing supporters of Trump and his Republican allies in the agricultural industries, a sector already hit by the US-China trade fight.

“We’ll try to pick products which will hurt the US worse,” an EU diplomat said. “You want to pressure those segments that are Trump’s voters, so he feels the pressure as well when he pressures us.”

The US and the EU, however, have been careful to separate their WTO fight over plane makers from other bilateral trade issues. On Tuesday, US said the two sides always try to compartmentalize issues and cooperate wherever they can. EU governments, meanwhile, greenlighted a mandate for talks with the US to slash tariffs on industrial goods.

“These are two different things,” another EU diplomat said.

 

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