US hits EU goods with new tariffs after WTO ruling

Donald Trump’s administration is moving to impose 25 per cent tariffs on a wide range of imports from the EU later this month, including cheese, olives, business suits and sweaters, after prevailing in a WTO case over illegal aircraft subsidies. 

Arbitrators at the Geneva-based body authorised Washington to press ahead with the largest retaliatory action in its history on Wednesday, after judging that the EU failed to abide by WTO rules in supporting Airbus, the pan-European aircraft manufacturer. 

After the ruling, senior officials from the US trade representative’s office said the administration would move quickly so that levies would be in place on EU goods by October 18.

While the WTO authorised the US to slap 100 per cent levies on $7.5bn of goods, Washington is limiting the hit, at least for now. New aeroplanes from the EU will be subject to a 10 per cent levy, while other agricultural and industrial products will face 25 per cent tariffs.

The latter category includes whiskies, pullovers and bed linens from the UK; coffee, knives and machinery from Germany; French wine and olives and Spanish olive oil. 

The new levies coming from Washington have threatened to further sour trade tensions with the EU at a time when the global economy is already slowing due to widening commercial conflicts around the world. Mr Trump hailed the ruling in a press conference with the president of Finland on Wednesday.

“It was a big win for the United States,” Mr Trump said at a news conference. When a reporter pointed out that the case was brought well before his presidency, he interjected: “The wins are now because they think I don’t like the WTO and they want to make sure I’m happy.”

Early next year the EU is expected to win approval for its own tariff offensive — possibly running to billions of dollars as well — over illegal aid to Boeing.

Together the decisions are expected to end a 15-year battle over subsidies to the US and European aerospace industries, just as China’s state-backed Comac is preparing to shake up what has for decades been a western duopoly in the aerospace market.

Cecilia Malmstrom, the EU trade commissioner, said in a statement that it would be “short-sighted and counterproductive” for the US to impose the tariffs, highlighting the likelihood that the EU would soon be allowed to do the same in the Boeing case. 

“The mutual imposition of countermeasures . . . would only inflict damage on businesses and citizens on both sides of the Atlantic, and harm global trade and the broader aviation industry at a sensitive time,” she said.

If the US and the EU reach a deal to settle their dispute, the tariffs could be avoided, but so far they have not engaged in serious negotiations. Both the US and the EU have blamed each other for the failure to avoid tariffs.

The tariff threat has risen to the top of the agenda in US relations with EU allies and was raised by Giuseppe Conte, the Italian prime minister, in talks with Mike Pompeo, the US secretary of state, in Rome on Tuesday.

While the bulk of the tariffs will apply to products from the four countries that make up the Airbus consortium — France, Germany, Spain and the UK — senior USTR officials said the failure to rein in Airbus subsidies was “EU-wide” and the bloc “collectively bears responsibility” for it.

Prominent Italian cheese producers including lobbyists for Parmigiano-Reggiano and Pecorino Romano lobbied hard to be shielded but will still face a 25 per cent levy. The US stressed that it could increase the tariffs at any time, or change the affected products.

Even American businesses could be hit, US airline Delta has warned. The Trump administration’s tariffs “will inflict serious harms on US airlines, the millions of Americans they employ and the travelling public”, it said in a statement. US airline stocks fell after the ruling.

Airbus called for both sides to negotiate a settlement before tariffs are imposed, warning of the damage that would be caused by an escalation of trade tensions to the US and global economies. It said 40 per cent of its aircraft-related procurement came from US suppliers. Aircraft parts, however, were not facing immediate tariffs, in a reprieve for Airbus’s manufacturing plant in Alabama.

“The WTO has already found that the US failed to address illegal subsidies causing harm to Airbus,” the company said in a statement. “If applied, these tariffs on both sides will severely impact US and EU industries, putting high costs on the acquisition of new aircraft for both US and EU airlines.”

Boeing said in a statement on Wednesday that Airbus “could still completely avoid these tariffs by coming into full compliance with its obligations. We hope it will finally do that.”

The dispute goes back to 2004 when the US first challenged repayable aid to its European rival for the launch of new aircraft. The previous year Airbus had overtaken Boeing in terms of aircraft deliveries. The following year the EU claimed Boeing had received illegal aid through defence contracts and tax breaks, launching what has been the world’s biggest corporate trade dispute.

Additional reporting by Demetri Sevastopulo in Washington, Guy Chazan in Berlin and Victor Mallet in Paris

Thanks to the Courtesy of :

https://www.ft.com/content/9a2c5af6-e51c-11e9-9743-db5a370481bc

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