US escalates EU aircraft subsidy row with proposed new tariffs worth $4bn

US President Donald J. Trump (C) speaks during a meeting with soldiers of the United States Forces in Korea (USFK) at the Osan Air Base in Pyeongtaek, Gyeonggi-do, South Korea, 30 June 2019. [EPA-EFE/KIM MIN-HEE]

The United States on Monday proposed $4 billion in tariffs on a range of European Union products – including parmesan cheese and Scotch and Irish whiskey – over subsidies for commercial aircraft.

The list also includes sausages, hams, pasta, olives and many other cheeses including reggiano, provolone, edam and gouda.

“Today, the Office of the US Trade Representative is issuing for public comment a supplemental list of products that could potentially be subject to additional duties,” it said in a statement.

The potential tariffs are due to “EU subsidies on large civil aircraft,” the statement said.

“This supplemental list adds 89 tariff subheadings with an approximate trade value of $4 billion to the initial list published on April 12, which included tariff subheadings with an approximate trade value of $21 billion,” it added.

US threatens EU with new tariffs over Airbus subsidies

The US on Monday (8 April) threatened to impose tariff counter-measures of up to $11.2 billion on a host of European products, including cheese and wine, in response to subsidies received by aircraft maker Airbus.

Trading accusations

For more than 14 years, Washington and Brussels have accused each other of unfairly subsidising aviation giants Boeing and Airbus, respectively, in a tit-for-tat dispute that long predates US President Donald Trump’s time in office.

The Boeing-Airbus spat is the longest and most complicated dispute dealt with by the World Trade Organisation, which aims to create a level playing field in global trade.

Senior officials from Boeing and a US aerospace trade group urged the US government last month to avoid harming American manufacturers and narrowly tailor any tariffs imposed on the EU.

No comment was immediately available from Boeing or Airbus.

The Distilled Spirits Council of the United States criticised the Trump administration’s latest tariff threats and warned they would jeopardise US jobs and hurt consumers.

“We strongly oppose the inclusion of distilled products in the proposed retaliation list,” said spokeswoman Lisa Hawkins.

“US companies – from farmers to suppliers to retailers – are already being negatively impacted by the imposition of retaliatory tariffs by key trading partners on certain US distilled spirits … and these additional tariffs will only inflict further harm,” she said.

WTO requests final fix in EU-US aircraft subsidy war

The World Trade Organisation (WTO) released a final ruling on Thursday (28 March) saying the US and Boeing have complied with all but one subsidy complaint in a dispute with Europe over aircraft subsidies.

US open to negotiation, EU ready to retaliate

Monday’s move followed news during the Paris Air Show that the United States could be open to negotiations on an “enforceable mechanism” that could allow Airbus to receive government funding on commercial terms, potentially paving the way for an end to the aircraft subsidy fight.

Such a deal would also include moves by the United States to address tax incentives provided by Washington state to Boeing and make them compliant with trade rulings, as part of a possible new framework for aircraft industry funding, two US sources said at the time.

The WTO has found that the world’s two largest planemakers received billions of dollars of harmful subsidies in a pair of cases marking the world’s largest-ever corporate trade dispute.

It is expected to rule on the US sanctions request over the summer, although the date could slip to September.

Meanwhile, Europe is prepared to retaliate in the event that the US slaps new tariffs on EU goods. In April, the European Commission prepared a list of US products that could be affected by fresh duties worth €19 billion, EURACTIV reported.

EXCLUSIVE – EU threatens US with €19 billion of tariffs in response to Boeing subsidies

The EU is considering slapping more than €19 billion in fresh tariffs against the US in response to subsidies provided to planemaker Boeing, EU and European officials told EURACTIV.

Trump has made taking aim at what he views as unfair trade practices that disadvantage the US a key goal of his presidency, and tariffs are his favored tool for doing so.

The latest chapter in the US-EU trade spat comes amid a trade war between Washington and Beijing that has seen the two sides impose tariffs on hundreds of billions of dollars in two-way trade.

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