WASHINGTON – The United States announced on Wednesday plans to impose tariffs on $7.5 billion in goods from the European Union following a ruling by the World Trade Organization, which on Wednesday decided in favor of Washington in a prolonged commercial dispute.
The new duties represent the most significant trade action against the EU since the administration of President Donald Trump 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.
“The United States will begin applying WTO-approved tariffs on certain EU goods beginning October 18,” US Trade Representative Robert Lighthizer said in a statement.
In a long-awaited ruling, the WTO said that Washington may impose trade sanctions worth $7.5 billion annually on the EU. The US’ top trade official explained that, for now, the tariffs increases will be limited to 10 percent on large civil aircraft that the EU sells to the US and 25 percent on certain agricultural and other products.
The most affected countries – as a bulk of the tariffs will be applied to their goods – are set to be France, Germany, Spain and the United Kingdom – “the four countries responsible for the illegal subsidies,” explained Lighthizer, in reference to the subsidies given to European planemaker Airbus that sparked the ruling by the world trade regulator.
The WTO determined that the American aircraft manufacturer Boeing lost the equivalent of $7.5 billion in potential sales due to illegal subsidies that EU governments gave to its European rival Airbus, one of the biggest aircraft manufacturers in the world.
France, Germany, Spain and the United Kingdom offered loans to Airbus at a lower interest rate than the market, which allowed the company to develop some of its most recent and advanced models.
“For years, Europe has been providing massive subsidies to Airbus that have seriously injured the US aerospace industry and our workers,” said Lighthizer.
The 15-year-old transatlantic dispute in the WTO could lead to a tariff war between the EU and the US, although the White House has left the door open to negotiate and has asked the WTO to schedule a meeting on Oct. 14 to formally approve the US’ tariffs request.
Fresh cheese, olives, olive oil and pork products of Spanish, German and British origin, as well as French wine, are among the affected products included in a list distributed by the Office of the US Trade Representative.
Yogurts, butter, cherries and peaches from most EU countries will be affected as well.
Trump called on Wednesday the WTO ruling a “big win” for the US.
He also commented that the WTO wanted to make sure he was “happy” because they knew he was not favorable to free trade.
European Trade Commissioner Cecilia Malmström, meanwhile, said in a statement that any US measure to impose tariffs would be considered “short-sighted and counterproductive.”
A senior USTR official said Europe hadn’t reached out for negotiations until last month, adding that the US hopes the new tariffs will bring Europe to the table.
A US-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 (scheduled for early next year), the EU is considering revoking a settlement with the US from 2006 over tax exemptions for international sales structures used by Boeing and other US companies known as foreign-sales corporations.
Such a move could affect some $4 billion worth of US 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 US 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.