Trump eyes tariffs on US$11 billion of EU goods for Airbus aid

Donald Trump to retaliate by proposing to impose tariffs on the European Union. (Reuters pic)

WASHINGTON: President Donald Trump’s administration is proposing tariffs on some US$11 billion in imports from the European Union in response to harm the US says is being caused by the bloc’s subsidies to Boeing Co. rival Airbus SE.

In issuing the list, which includes goods ranging from jetliners and passenger helicopters to cheese, wine, ski-suits and motorcycles, the US Trade Representative’s office cited the World Trade Organization’s finding that aid to Airbus has “repeatedly” caused “adverse effects to the United States.”

The USTR said in its statement on Monday evening that the Trump government will immediately begin a process under Section 301 of the Trade Act of 1974 to “identify products of the EU to which additional duties may be applied until the EU removes those subsidies.”

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The threatened tariffs, which come after the WTO ruled in May that Airbus had received illegal funding for its A380 and A350 models, costing Boeing sales, would be implemented only after the WTO gave the final go-ahead this summer, the administration said, marking a rare show of faith in an institution that Trump himself has assailed.

Shares of Toulouse, France-based Airbus fell as much as 2.3%, the biggest drop in 2 1/2 weeks, before trading 1.7% lower as of 9:19 a.m. in Paris. Aerospace suppliers including Rolls-Royce Holdings Plc and Meggitt Plc were also priced lower.

The US move is provocative on a number of fronts. Washington said it would impose the tariffs under the same previously dormant trade statute that it has used to justify duties on China over the past year.

The threat also comes just as the EU’s members are in the final stages of negotiating the terms of a mandate for the European Commission, its executive arm, to begin talks on industrial tariffs with the Trump administration. The new action may therefore further complicate those contacts.

The proposed measures are relatively minor compared with the US’s ongoing trade war with China, in which the two sides have imposed tariffs on about US$360 billion of each other’s goods in the past nine months. But they mark a significant escalation in tensions with the EU, which has implemented retaliatory duties on 2.8 billion euros (US$3.2 billion) of U.S. imports following Trump’s trade restrictions on foreign steel and aluminum.

Some EU members, led by France, are already skeptical of the value of negotiations with the US, which were agreed to last July in a bid by the EU to avoid auto tariffs Trump has threatened. Furthermore, a draft of the mandate seen by Bloomberg specifically gives the EU an opt-out if the US were to impose tariffs on the bloc using the Section 301 justification.

Robert Lighthizer, the US trade representative, said in a statement on Monday night that the US had lost patience with what is now one of the WTO’s longest running sagas.

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“This case has been in litigation for 14 years, and the time has come for action,” he said in the statement.

Yet he also signaled that the administration wanted to see an end to the EU subsidies in question, which Boeing and the US claim give Airbus an unfair advantage in the highly competitive passenger aircraft market internationally.

“Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft,” he said. “When the EU ends these harmful subsidies, the additional US duties imposed in response can be lifted.”

In a statement, Boeing said the company “supports the US trade representative and his team in their ongoing efforts to level the playing field in the global aircraft marketplace.”

The proposed tariffs come nearly 15 years after the US first complained to the WTO that Airbus had widely benefited from billions of dollars in illegal subsidies. A countersuit by the European Union is still winding its way through the trade court, which found last month that about $325 million in tax incentives offered by Washington state to Boeing were unlawful.

Airbus didn’t immediately respond to requests for comment. The EU said last May that the WTO had rejected the US challenge to the bulk of support for the manufacturer – including backing for the best-selling A320 single-aisle series – and that it would take swift action to ensure compliance with the decision.