$4 Billion In Tariffs Of US-EU Exports Approved By WTO

The World Trade Organization has today authorized the European Union to levy tariffs on up to $4 billion worth of goods imported from the US. The move comes almost exactly a year after a similar approval was made for the US to tax goods imported from the EU. It’s the latest installment in a 16-year saga over illegal state aid given to Boeing and Airbus.

Boeing 777-300ER factory ANA
Today’s decision will see Boeing’s aircraft becoming more expensive for EU airlines. Photo: Getty Images

WTO approves tariffs on $4bn US goods

The World Trade Organisation (WTO) has today announced its decision on the European side of the long-running subsidies dispute. The decision has fallen on the side of the European argument, with the WTO authorizing the EU to impose tariffs on US goods exported to the bloc.

The total value of these tariffs is pegged at $4 billion worth of goods. This contrasts with the approval last year of taxes on $7.5 billion worth of goods a year being exported to the US from the EU. That award was the largest in history, marking the culmination of the longest-running dispute the WTO has had to handle.

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A320 factory
Last year, $7.5 billion worth of EU goods had import taxes added. Photo: Airbus

Despite the tit-for-tat tariff decision, there was no celebration in the Airbus camp. The planemaker’s CEO Guillaume Faury commented on the decision, saying,

“Airbus did not start this WTO dispute, and we do not wish to continue the harm to the customers and suppliers of the aviation industry and to all other sectors impacted.

“As we have already demonstrated, we remain prepared and ready to support a negotiation process that leads to a fair settlement. The WTO has now spoken, the EU can implement its countermeasures. It is time to find a solution now so that tariffs can be removed on both sides of the Atlantic.”

In a statement today, Airbus said that it fully supports the EU Commission in taking the necessary action to ‘create a new level playing field’ and to secure agreement in this long-running dispute. It further said that the illegal subsidies to Boeing had cost Airbus $4 billion in lost sales and market share every year.

No winners here

The 16-year old dispute around so-called illegal state aid given to both Boeing and Airbus has been an ugly and costly battle on both sides. The parallel case came to a head in the fall of last year and saw tariffs slapped on a host of European exports, including wine, cheese and, of course, aircraft parts.

Today’s decision will not be welcome on either side of the Atlantic, particularly given the other tough economic factors facing US businesses right now. In 2019, the US was the largest partner for EU export of goods but was also the second-largest partner for the EU’s import of goods. According to the European Commission, €232 billion ($272 billion) worth of goods were imported to the EU from the US last year.

$4 Billion In Tariffs Of US-EU Exports Approved By WTO
Aircraft and parts are a significant import on both sides of the Atlantic. Image: European Commission

The most-traded goods last year included medical and pharmaceutical products, engines and motors, and aircraft and associated equipment. The value of imported aircraft and parts, in the main from the Boeing Company, was estimated to be worth almost $20 billion.

For airlines in the EU, the prospect of paying more on top of already expensive aircraft and parts will be highly unwelcome, particularly in the current climate. When the US introduced tariffs on Airbus planes and parts, it was set at 10%. It remains to be seen if the tariffs in the opposite direction end up at a similar level.

The details will take some time to thrash out, but it’s clear there are no winners here. On the positive side, now there are painful tariffs in both directions, it opens the door to further negotiations, which could see a resolution to this dispute once and for all.