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U.S. Can Impose Tariffs on $7.5 Billion in European Exports U.S. to Tax European Aircraft, Agriculture and Other Goods
(about 4 hours later)
WASHINGTON — The World Trade Organization granted the United States permission to impose tariffs on as much as $7.5 billion of European products annually as part of a long-running complaint over subsidies given to European plane maker Airbus, clearing the way for the Trump administration to tax airplanes, wine and other goods from Europe. WASHINGTON — The Trump administration said Wednesday that it would impose tariffs on European aircraft, agricultural products and industrial goods starting Oct. 18, after the World Trade Organization granted the United States permission earlier in the day to tax as much as $7.5 billion of European exports.
The ruling is the largest authorized retaliation in the WTO’s history, and it brings to an end a roughly 15-year dispute over the financial assistance that Europe provides to its major plane maker. But it could tip off a further escalation, worsening tensions between the United States and the European Union that have already been strained by President Trump’s confrontational approach to trade. The tariffs are part of a long-running complaint over subsidies given to European plane maker Airbus and are intended to allow the United States to recoup some of the losses American plane maker Boeing sustained because of Europe’s unfair trade practices.
The World Trade Organization ruled last May that Europe had illegally subsidized several of Airbus’s models, to the detriment of its American competitor, Boeing. In the latest ruling this week, the global trade body announced the value of the damages that the United States could seek to recoup by imposing tariffs. But the tariffs could also raise prices for American companies and customers who import products from Europe, affecting airlines, manufacturers and customers at the grocery store.
The United States Trade Representative has already prepared two lists of up to $25 billion worth of products that it might tax, including airplanes, fish, wine, leather purses, carpets and clocks. It is expected to soon announce its final decision on which goods will be taxed. The administration’s decision to slap levies on European products could also further escalate tensions between the United States and the European Union, which has bristled at President Trump’s confrontational trade approach.
Europe is prepared to respond to American tariffs with its own levies. The WTO is considering a parallel case that the European Union has brought against the United States for subsidizing Boeing, and the E.U. has drawn up its own list of $20 billion in American products that it could tax in response to that case. The WTO is expected to announce that decision early next year. The World Trade Organization decision brings to an end a roughly 15-year dispute over the financial assistance that Europe provides to its major plane maker. The organization ruled last May that Europe had illegally subsidized several of Airbus’s models, to the detriment of its American competitor, Boeing.
In the latest ruling this week, the global trade body announced the value of the damages that the United States could seek to recoup by imposing tariffs. At $7.5 billion, the award was the largest authorized retaliation in the WTO’s history.
The United States Trade Representative announced Wednesday that it plans to levy a 10 percent tariff on European aircraft and a 25 percent tariff on agricultural goods, industrial products and other imports in an effort to pressure the European government to abandon its subsidies.
European officials have said they are eager to negotiate a solution, but that they are prepared to respond with their own levies on American goods. The WTO is considering a parallel case that the European Union has brought against the United States for subsidizing Boeing, and the E.U. has drawn up its own list of $20 billion in American products that it could tax in response to that case. The WTO is expected to announce that decision early next year.
In a statement Wednesday, Cecilia Malmstrom, the European commissioner for trade, said that even though the United States had obtained WTO permission to levy tariffs, “opting for applying countermeasures now would be shortsighted and counterproductive.”In a statement Wednesday, Cecilia Malmstrom, the European commissioner for trade, said that even though the United States had obtained WTO permission to levy tariffs, “opting for applying countermeasures now would be shortsighted and counterproductive.”
“Both the EU and the U.S. have been found at fault by the WTO dispute settlement system,” she said. “The mutual imposition of countermeasures, however, 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.” “Both the EU and the U.S. have been found at fault by the WTO dispute settlement system,” she said. “The mutual imposition of countermeasures, however, would only inflict damage on businesses and citizens on both sides of the Atlantic.”
In a call with reporters Wednesday, a senior official with the office of the United States Trade Representative said that the Europeans had not put forward a sufficient solution or stopped the subsidies, arguing that the nature and size of the subsidies provided by the E.U. dwarfed anything that the United States provided to domestic companies.
An escalating trade spat with Europe would open another front in the global trade war that Mr. Trump has undertaken to try and change trade terms that he says have long disadvantaged the United States. The president has already imposed tariffs on more than $360 billion of products from China, in addition to levies on washing machines, solar panels and steel and aluminum from Japan and Europe.An escalating trade spat with Europe would open another front in the global trade war that Mr. Trump has undertaken to try and change trade terms that he says have long disadvantaged the United States. The president has already imposed tariffs on more than $360 billion of products from China, in addition to levies on washing machines, solar panels and steel and aluminum from Japan and Europe.
Those actions have raised the average American tariff rate to levels not seen in decades. The United States now has the highest tariff levels of any of the Group of 7 industrialized nations.Those actions have raised the average American tariff rate to levels not seen in decades. The United States now has the highest tariff levels of any of the Group of 7 industrialized nations.
Markets sank Wednesday morning, following fresh evidence that the trade war is weighing on the global economy.Markets sank Wednesday morning, following fresh evidence that the trade war is weighing on the global economy.
In a report published Tuesday, the World Trade Organization slashed its forecast for global trade growth this and next year. And a closely watched gauge of American manufacturing showed factory activity slowed in September, the second straight month of decline. New export orders in particular plummeted, suggesting a further trade downturn to come.In a report published Tuesday, the World Trade Organization slashed its forecast for global trade growth this and next year. And a closely watched gauge of American manufacturing showed factory activity slowed in September, the second straight month of decline. New export orders in particular plummeted, suggesting a further trade downturn to come.
The S&P 500 Index was down 1.47 percent at 10:30 a.m. Eastern time Wednesday, while the Dow Jones industrial average was down 1.45 percent. Airlines were hit particularly hard, since the additional tariffs are likely to increase the cost of new aircraft purchases. American Airlines Group fell 2.20 percent, while United Airlines slumped 3.76 percent and Delta Air Lines was down 4.24 percent. The S&P 500 was down about 2 percent and on track for its worst day since late August. Stocks in Europe tumbled.
Trade tensions between the United States and the European Union have already been running high. The governments announced in mid-2018 that they would work toward a trade agreement, but negotiations quickly stalled over a dispute about whether agriculture should be included in the talks. Mr. Trump has been fiercely critical of Europe for selling more to the United States than it purchases and is considering hitting the bloc with additional tariffs on its cars this fall.Trade tensions between the United States and the European Union have already been running high. The governments announced in mid-2018 that they would work toward a trade agreement, but negotiations quickly stalled over a dispute about whether agriculture should be included in the talks. Mr. Trump has been fiercely critical of Europe for selling more to the United States than it purchases and is considering hitting the bloc with additional tariffs on its cars this fall.
“They have not been treating this country right for many, many years, and they know it,” Mr. Trump said of Europe on Wednesday as he met with the president of Finland.
The European Union has been trying to head off the possibility of American retaliation through negotiations, but those talks have so far failed to produce an agreement that would forestall tariffs. Ms. Malmstrom said in an interview on Sept. 23 that the United States had been receptive to further discussions, but not to the idea of delaying its tariffs.The European Union has been trying to head off the possibility of American retaliation through negotiations, but those talks have so far failed to produce an agreement that would forestall tariffs. Ms. Malmstrom said in an interview on Sept. 23 that the United States had been receptive to further discussions, but not to the idea of delaying its tariffs.
The European Union had sent the United States a detailed proposal on crafting global rules on civil aircraft subsidies, she said, and she had discussed with Robert Lighthizer, the United States Trade Representative, while the two were in New York for the United Nations General Assembly last month. The European Union had sent the United States a detail proposal on crafting global rules on civil aircraft subsidies, she said, and she had discussed with Robert Lighthizer, the United States Trade Representative, while the two were in New York for the United Nations General Assembly last month.
“We already have too many tariffs in the world, so it would be unfortunate to do this,” Ms. Malmstrom said. “I think there is a high probability that they will impose those tariffs, and then we will have to respond.”“We already have too many tariffs in the world, so it would be unfortunate to do this,” Ms. Malmstrom said. “I think there is a high probability that they will impose those tariffs, and then we will have to respond.”
But some analysts defended the United States. Some analysts defended the United States.
“The EU has been found in violation of the law,” said Peter Chase, a former American diplomat and a senior fellow at the German Marshall Fund of the United States in Brussels. “It simply has no grounds to complain about the United States.”“The EU has been found in violation of the law,” said Peter Chase, a former American diplomat and a senior fellow at the German Marshall Fund of the United States in Brussels. “It simply has no grounds to complain about the United States.”
The EU “should now simply accept it’s been found in the wrong,” promise not to give further illegal funding to Airbus and agree to a schedule to repay excessive subsidies, Mr. Chase said.The EU “should now simply accept it’s been found in the wrong,” promise not to give further illegal funding to Airbus and agree to a schedule to repay excessive subsidies, Mr. Chase said.
The new tariffs would be unlike the taxes that Mr. Trump has imposed on Chinese goods and imported steel and aluminum, in that they have the advance approval of the World Trade Organization.The new tariffs would be unlike the taxes that Mr. Trump has imposed on Chinese goods and imported steel and aluminum, in that they have the advance approval of the World Trade Organization.
While the global trading organization does not encourage the use of tariffs, it does allow countries to impose them in certain situations where other governments are found to have broken WTO rules. If a country brings a trade dispute to the WTO and wins, the global body may authorize it to block a certain dollar value of trade from another country as a penalty.While the global trading organization does not encourage the use of tariffs, it does allow countries to impose them in certain situations where other governments are found to have broken WTO rules. If a country brings a trade dispute to the WTO and wins, the global body may authorize it to block a certain dollar value of trade from another country as a penalty.
The ruling Wednesday gives the go-ahead for the United States to impose enough tariffs to block $7.5 billion in trade from Europe annually, until the two sides reach a negotiated settlement, or the WTO decides that Europe is in compliance with WTO rules.The ruling Wednesday gives the go-ahead for the United States to impose enough tariffs to block $7.5 billion in trade from Europe annually, until the two sides reach a negotiated settlement, or the WTO decides that Europe is in compliance with WTO rules.
The $7.5 billion award that the WTO announced Wednesday is by far the largest granted in the organization’s 24-year-old history. The next largest was a $4 billion decision granted to the European Union in 2002 in a dispute against the United States.The $7.5 billion award that the WTO announced Wednesday is by far the largest granted in the organization’s 24-year-old history. The next largest was a $4 billion decision granted to the European Union in 2002 in a dispute against the United States.
But even though the tariffs would be in line with global rules, they are still likely to weigh on the economy and American companies. Even though the tariffs would be in line with global rules, they are still likely to weigh on the economy and American companies.
United States tariffs on aircraft would raise the cost of future plane purchases for America’s largest airlines. And by slowing Airbus’ business, tariffs could rebound on the many American manufacturers that supply components to the European plane maker.United States tariffs on aircraft would raise the cost of future plane purchases for America’s largest airlines. And by slowing Airbus’ business, tariffs could rebound on the many American manufacturers that supply components to the European plane maker.
In a statement, Airbus said that close to 40 percent of its aircraft-related purchases come from United States suppliers. The company spent $50 billion purchasing products in the United States in the last three years — more than it spent in France, Germany or the United Kingdom. Airbus has also set up a facility in Mobile, Ala., to do final assembly of jetliners for American customers.In a statement, Airbus said that close to 40 percent of its aircraft-related purchases come from United States suppliers. The company spent $50 billion purchasing products in the United States in the last three years — more than it spent in France, Germany or the United Kingdom. Airbus has also set up a facility in Mobile, Ala., to do final assembly of jetliners for American customers.
If the United States does impose tariffs on aircraft or aircraft parts, the company said, it would “create insecurity and disruption not only to the aerospace industry, but also to the broader global economy.”If the United States does impose tariffs on aircraft or aircraft parts, the company said, it would “create insecurity and disruption not only to the aerospace industry, but also to the broader global economy.”
Tariffs “would have a negative impact on not only the US airlines but also US jobs, suppliers, and air travelers,” said Guillaume Faury, the company’s chief executive. “Airbus is therefore hopeful that the US and the EU will agree to find a negotiated solution before creating serious damage to the aviation industry as well as to trade relations and the global economy.”Tariffs “would have a negative impact on not only the US airlines but also US jobs, suppliers, and air travelers,” said Guillaume Faury, the company’s chief executive. “Airbus is therefore hopeful that the US and the EU will agree to find a negotiated solution before creating serious damage to the aviation industry as well as to trade relations and the global economy.”