By Emre Peker and Joshua Zumbrun
The Trump administration will move swiftly to implement tariffs
on $7.5 billion of imports from the European Union, following a
decision from the World Trade Organization earlier Wednesday that
authorized tariffs due to EU subsidies of Airbus SE.
The Office of the U.S. Trade Representative will impose the
tariffs on Oct. 18, according to a senior USTR official, in what
will be the largest escalation of tariffs against Europe since the
U.S. imposed tariffs on steel and aluminum imports last year,
potentially opening up a new rift in the Trump administration's
global trade fight.
The U.S. was authorized to impose tariffs of up to 100% on $7.5
billion of goods by the WTO decision which followed a 15-year
battle over support programs for aircraft makers Airbus and Boeing
Co. The WTO will rule on a companion case against subsidies to
Boeing, also deemed illegal, early next year, at which point the
European Union will be authorized to strike back with tariffs of
its own.
The U.S. will impose tariffs on the full $7.5 billion worth of
goods authorized by the WTO decision, but the rate of those tariffs
will be lower, set as a 10% tariff on large commercial aircraft,
and 25% on agricultural and industrial goods, according to the
official. A list of the precise goods facing tariffs will be
published within a day, the official said.
The WTO ruled that the U.S. is entitled to levy tariffs on $7.5
billion of exports from the EU in response to the bloc's subsidies
to Airbus. The decision Wednesday marks the biggest arbitration
award ever issued by the trade regulator and concludes part of the
15-year battle over support programs for the two aircraft
makers.
The WTO ruling set up a collision between allies that have long
resolved most disagreements without resorting to duties. EU
officials in Brussels have proposed negotiating a settlement to
avoid tit-for-tat tariffs, but U.S. officials say Europe must first
comply with WTO rulings. The standoff risks escalating trade
tensions at a critical time.
President Trump is poised to decide by Nov. 13 whether to levy
tariffs on EU cars and auto parts, raising the threat of a rapid
escalation of trans-Atlantic duties on goods worth some $100
billion. Leaders of a new EU administration, slated to take office
Nov. 1, have urged Mr. Trump to avoid a trade war.
At stake for the world's two biggest plane manufacturers is the
fracturing of the market.
Under WTO rules, Washington and Brussels may levy tariffs on any
products from aircraft parts to food, alcoholic beverages,
motorcycles and bicycles. That could potentially dent Airbus sales
in the U. S. -- and Boeing sales in Europe next year -- while also
disrupting global supply chains.
The EU filed its WTO complaint against Boeing nine months after
the U.S. case against Airbus. Washington, as a result, will be able
to punish Europe first.
Washington has prepared a list of European goods valued at $21
billion from which it can select for tariffs. Brussels has a $20
billion list of U.S. exports to target.
"If the U.S. decides to impose WTO-authorized countermeasures,
it will be pushing the EU into a situation where we will have no
other option than do the same," EU Trade Commissioner Cecilia
Malmstrom said earlier Wednesday. She said the U.S. hadn't
responded to an EU proposal from July for a comprehensive plan to
regulate subsidies for the civil-aircraft industry, and establish a
global framework.
A U.S.-EU fight at a time Russia and China are subsidizing their
aircraft-makers to compete with the world's two biggest plane
manufacturers would be counterproductive, European officials say.
French Economy and Finance Minister Bruno Le Maire said Wednesday
that a U.S. decision to impose sanctions over Airbus instead of
settling "would be an economic and political mistake."
Mr. Trump said in April that EU subsidies for Airbus hurt the
U.S. and that "it will soon stop." He said Washington would impose
tariffs to recover damages, a position the U.S. ambassador to the
EU, Gordon Sondland, reiterated in September.
U.S. tariffs could prompt Europe to impose tariffs before
seeking a settlement and even before the WTO rules on its case
against Boeing, according to EU diplomats.
To avoid having no response until the WTO ruling, the EU is
considering revoking a settlement with the U.S. from 2006 over tax
exemptions for international sales structures used by Boeing and
other U.S. companies known as foreign-sales corporations. That
would enable Brussels to hit some $4 billion worth of U.S. exports,
but also risks unraveling decades of similar trade settlements.
"You have to look at it from a tactical point of view," an EU
diplomat said. "We bring it to the table to highlight all our
options and create some leverage, but our line has been to just
settle it with a negotiated solution."
While the EU hasn't yet decided on its immediate response,
officials acknowledge that revoking old rulings might backfire --
and potentially even prompt U.S. car tariffs. It is within the EU's
right to revoke a prior settlement, although it would be
unusual.
Following Wednesday's WTO decision, Airbus called on Washington
and Brussels to avoid tariffs that would "severely impact" the
aircraft industry, hurt U.S.-EU trade relations and damage the
global economy. Duties would raise costs for airlines on both sides
of the Atlantic and hit a U.S. supply chain employing 275,000
people and billions of dollars in revenue annually, the European
plane maker said.
"Airbus is therefore hopeful that the U.S. and the EU will agree
to find a negotiated solution," Chief Executive Officer Guillaume
Faury said in a statement. The aircraft maker, which risks losing
sales because of potential levies, also sources some 40% of its
parts from the U.S. and has a plant in Mobile, Ala.
Boeing accused Airbus of refusing to comply with WTO rulings and
pushing the U.S. toward placing tariffs on European exports.
"Airbus could still completely avoid these tariffs by coming
into full compliance with its obligations," Boeing said. "We hope
it will finally do that."
The WTO aircraft battle could further strain trans-Atlantic
trade relations amid a shaky truce in place since July 2018. A
White House agreement at that time halted tit-for-tat tariffs on
some $10 billion worth of European and American exports -- salvos
that Mr. Trump triggered by slapping the EU with steel and aluminum
duties that the bloc deemed illegal. But the two sides have yet to
deliver on a pledge to strike an industrial-goods trade deal and
liberalize commerce by cutting red tape.
"It takes two to tango, and I'm ready to engage politically with
the United States to resolve our trade differences," said Phil
Hogan, the EU agriculture commissioner who has been tapped as trade
chief for the incoming administration.
During his confirmation hearing Monday at the European
Parliament, Mr. Hogan said "it doesn't make sense" for the U.S. to
shun EU proposals to settle the Airbus and Boeing disputes,
especially since Brussels would soon be able to hit back against
Washington's tariffs. He added, "We have to defend the European
Union."
Write to Emre Peker at emre.peker@wsj.com
(END) Dow Jones Newswires
October 02, 2019 16:15 ET (20:15 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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