Retaliatory Tariffs Update: US Wins Levy Approval In Boeing, Airbus WTO Dispute

The World Trade Organization reportedly granted the United States approval to impose billions of dollars in tariffs on European Union goods because of illegal government support for European plane-maker Airbus (AIR.PA) in what could develop into a tit-for-tat tariff war.

The WTO has found both Airbus and U.S. rival Boeing (BA) received billions of dollars in subsidies over more than a decade, Reuters reported, quoting people familiar with the world’s largest-ever corporate trade dispute.

The WTO ruled in favor of Boeing last year regarding subsidies for the A350 and A380, saying the EU had failed to honor previous rulings on more than $22 billion in subsidies. The WTO directed the EU to end the subsidies and address damages extending back to 2006.

Washington wanted to impose tariffs as high as 100% on $11.2 billion of European goods, including aircraft and aerospace parts from Britain, France, Germany and Spain, as well as such things as wine, cheese and luxury goods from elsewhere in the EU, targeting such brands as LVMH Moet Hennessy, Louis Vuitton, Christian Dior and Hermes.

An arbitration tribunal is scheduled to meet Monday to determine how the tariffs are to be implemented on a reported $7.5 billion to $8 billion in goods from a list of $25 billion in items. The tariffs could be imposed as early as Oct. 1.

In a counterclaim to the WTO, the EU is seeking $12 in tariffs over U.S. subsidies to Boeing, but that is not expected to be resolved for six months. The list of items on which the EU would impose tariffs range from ketchup to video-game consoles.

The U.S. was expected to contest any move by the EU to impose $4 billion tariffs left over from a 2002 complaint that dealt with tax breaks for U.S. exports. The two sides settled that dispute without WTO intervention.

Airlines – including American, Delta and Jet Blue -- have asked President Trump to back down, warning tariffs could lead to higher airfares.

U.S. relations with the EU have deteriorated since Trump took office. Washington also is considering tariffs on European auto imports.

European Trade Commissioner Cecilia Malmstrom said last week she tried to resolve the dispute, but the U.S. never responded to the overture. She said tariffs are not the answer.

“Our view is that we have enough tariffs in the world as it is, so imposing tariffs on each other … would not be a good solution to this,” she said.