Trump Administration Will Raise Tariffs on European Aircraft

https://www.nytimes.com/2020/02/14/business/economy/trump-airbus-trade-tariffs.html

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WASHINGTON — The Trump administration said it would raise tariffs on European aircraft in an effort to pressure Europe in a long-running trade dispute over airplane subsidies.

The United States Trade Representative said late Friday that it would increase the duty it had imposed on European aircraft to 15 percent from 10 percent, effective March 18. It also removed prune juice for the list of taxed items, and added a 25 percent tax on French and German butcher and kitchen knives.

The annual value of the goods subject to tariffs would remain at $7.5 billion, as before, the trade representative said.

The tariffs are part of a 15-year-old complaint over subsidies European governments gave plane maker Airbus, which put its American competitor, Boeing, at a disadvantage. In October, the World Trade Organization granted the United States permission to try to recoup its losses by taxing as much as $7.5 billion of European exports annually. Those tariffs are expected to continue until Europe removes its subsidies or the two governments come to a negotiated resolution.

The airplane dispute is just one irritant in an increasingly fraught trading relationship with Europe.

The United States and the European Union remain at odds over France’s plan to tax American technology companies. European officials have also been angry that the United States has effectively paralyzed the W.T.O. by refusing to sign off on new appointees to a crucial appeals panel.

Despite those disputes, the two governments have continued to negotiate to improve trade terms. After announcing plans for a comprehensive trade deal in 2018, both sides appear to have scaled back their ambitions, with officials saying they might settle on a “mini-deal” that would focus on a few sectors.

In a news conference with President Trump in Davos, Switzerland, in January, the European Commission president, Ursula von der Leyen, said she was expecting to reach a trade agreement that she could sign with the United States “in a few weeks.” But details on such an agreement have since been scarce, with few visible high-level meetings.

The tariff changes could put more pressure on Europe to reach a deal. Under U.S. law, the United States Trade Representative is required to periodically revisit and revise tariffs put in place as part of a W.T.O. dispute, to put more pressure on negotiating partners to reach a resolution.

The tariffs that the United States imposed on Europe in October included a 10 percent tax on aircraft from Britain, France, Germany and Spain, and a 25 percent tax on wine, cheese, pork, whiskey, olives and other agricultural products.

Although these levies are permitted under the rules of the W.T.O., they have still raised an outcry from consumers and industries in the United States.

“The Trump administration’s threat of a tariff ‘carousel’ — shifting even one new product onto a list hit with new import taxes — generates even more of the uncertainty that haunts American business and workers,” said Chad Bown, a senior fellow at the Peterson Institute. “Even though there were few changes today, little was resolved, and the administration has made sure that much of that uncertainty will remain.”

Some industries that had been hoping for relief were disappointed when the administration announced their changes to the tariffs Friday night.

Harry Root, founder of the U.S.-Wine Trade Alliance, a group that represents wine distributors and other professions in the United States, said wine tariffs had done disproportionate damage to American businesses and consumers — and that European winemakers had responded by shipping more products to China instead.

Mr. Root said that the administration had heard the industry’s message “loud and clear,” that wine tariffs were inefficient. But when the trade representative published its list Friday night, the 25 percent tariff on European wine remained in place.

American and European negotiators have met to discuss the possibility of a resolution — potentially in the context of negotiations toward a broader trade deal — but so far have failed to reach an agreement.

Airbus’s chief executive, Guillaume Faury, said that regardless of the Trump administration’s tariff adjustments on Friday, the bigger issue for the company was whether Europe and the United States could strike a settlement this summer.

The W.T.O. is expected to rule as early as May on a parallel case, in which Europe has claimed that the United States provides its own unfair subsidies to Boeing. The W.T.O. is expected to give the European Union the go-ahead to apply counter tariffs on American imports to Europe.

Mr. Faury acknowledged that U.S. penalties on products like cognac, wine and other agricultural goods and industrial products hurt small producers. A 10 percent tax applies to European aircraft, though Mr. Faury added Airbus had managed to keep costs “manageable” for U.S. customers.

“It’s a lose-lose situation,” Mr. Faury said. “We think 2020 is the year to put this behind us and move forward as an industry with no tariffs and good competition.”

As tensions have heated up with Europe, the Trump administration has calmed its trade disputes on other fronts.

The Trump administration’s initial trade deal with China went into effect on Friday, with tariffs on more than $110 billion of Chinese goods dropping from 15 percent to 7.5 percent. Tariffs on roughly $250 billion worth of Chinese goods will remain at the 25 percent rate.

Liz Alderman contributed reporting from Paris.