The Trump administration imposed tariffs on additional products from the European Union as part of a long-running dispute over subsidies to aircraft makers Airbus SE and Boeing Co.
In November, the EU instituted duties on some US$4 billion in goods from the U.S. after gaining approval from the World Trade Organization. A year earlier, the U.S. sanctioned about US$7.5 billion in imports from the EU including French wine and Scotch whisky.
The U.S. Trade Representative’s office on Wednesday said it was amending some of its tariffs because the EU used a time period that affected “substantially more products than would have been covered” otherwise and that the EU “needs to take some measure to compensate for this unfairness.”
Although the U.S. “explained to the EU the distortive effect of its selected time period, the EU refused to change its approach,” the USTR said, resulting in the office instituting additional tariffs. The duties will include aircraft-manufacturing parts, certain non-sparkling wine, and certain cognac and other grape brandies from France and Germany, it said.
In a notice in the Federal Register, the USTR said the overall value of goods being hit remains US$7.5 billion, after adjusting the time period in its sanctions to match the EU’s.
Settlement Talks
Wednesday’s move marks yet another chapter in trans-Atlantic tit-for-tat tariffs that have already seen some US$11.5 billion in trade targeted. It comes even as the two sides say they are discussing a negotiated solution to a dispute over subsidies for wide-body commercial aircraft that began almost two decades ago.
“In order to not escalate the situation, the United States is adjusting the product coverage by less than the full amount that would be justified utilizing the EU’s chosen time period,” the USTR said. Airbus had no immediate comment.
U.S. Trade Representative Robert Lighthizer and his European Commission counterpart, Valdis Dombrovskis, have both expressed their desire for a negotiated settlement and been engaged in discussions in recent weeks. But the latest move reflects Lighthizer’s skepticism that such a deal can be done with less than a month left in Donald Trump’s presidency and that the EU may be holding out to deal what they see as a more accommodating Biden administration.
A trade spokesperson at the Brussels-based commission, the EU’s executive arm, didn’t immediately respond on Thursday to a request for comment on the latest U.S. action.
President-elect Joe Biden and top advisers have signaled their desire to repair trade and other relations with allies including the EU that have been strained by Trump’s “America First” policies.
Airbus Impact
Both Airbus and Boeing have been hit hard by the pandemic and its impact on air travel. A recent surge in COVID-19 cases in both Europe and the U.S. has also increased the likelihood of a double-dip recession in the EU and a slowing recovery in the U.S. economy. That could prolong the pain for both aircraft makers and raise the economic stakes for their home countries.
Airbus shares fell 0.7 per cent to 90.63 euros as of 9:43 a.m. Thursday in Paris. They have declined 31 per cent this year.
The European planemaker has production in five countries and assembles both A320 and A220 aircraft at a plant in Mobile, Alabama -- products that haven’t previously been subject to tariffs, while A320s completed in France and Germany are. That could change, given the extended levies now cover major parts like fuselage sections, wing and wing assemblies brought in from Europe, along with horizontal and vertical stabilizers, Jefferies analyst Sandy Morris said in a note.
Airbus’s global manufacturing system means that even A320 wings made in the U.K. -- which isn’t targeted by the new measures -- are completed in Germany, Morris said in a note.
“Our initial take is that tariffs now apply to major components of Airbus aircraft assembled in the USA,” he said. “We hope the wider WTO matter can soon be resolved, but for now, Airbus may face additional disruption.”
While Airbus has been able to avoid tariffs on its U.S.-made aircraft, Chicago-based Boeing doesn’t assemble commercial aircraft in the EU. It has no option to avoid the costly tariffs imposed by the EU and customers such as Ryanair Holdings Plc have said they won’t pay the levy.
The U.K. government has separately opted to drop tariffs on U.S. goods in a move designed to reduce trade tensions with the U.S. as the country completes its split from the EU.
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