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WTO: US Can Sanction Nearly $8 Billion of EU Goods Over Airbus Aid

Sept. 25, 2019
The WTO says E.U. supplied Airbus SE with illegal aid. Europe is pursuing a similar case against the United States' aid to Boeing and is expected to retaliate.

The World Trade Organization will authorize the U.S. to impose tariffs on nearly $8 billion of European goods due to illegal state aid provided to aircraft maker Airbus SE, according to people familiar with the decision, a move that will likely trigger retaliatory measures from the European Union.

The U.S. duties, which could hit as soon as October, will target planes and parts as well as luxury products, such as wine and spirits like Dom Perignon and Moet & Chandon -- and leather goods under labels such as Givenchy and Louis Vuitton, according to a list published by the U.S. Trade Representative’s office.

The people who spoke of the ruling asked not to be identified because the confidential WTO decision isn’t due to be published until Sept. 30.

The verdict marks the latest chapter in the WTO’s longest-running dispute and will further test transatlantic relations, which have deteriorated under Trump’s “America First” strategy. And while the scope of this conflict is limited, Washington is separately mulling tariffs on auto imports, which would dramatically increase Europe’s stake in the American trade war.

The EU is pursuing a similar case at the WTO over illegal subsidies the U.S. provided to Boeing Co., and has published a preliminary list of U.S. goods -- from ketchup to video-game consoles -- it will target in a $12 billion plan for retaliatory levies. A decision in that case is expected from the Geneva-based trade organization in the first half of 2020.

Boeing Shares Rise

Boeing climbed 1.6% to $387.70 at 12:59 p.m. in New York, hovering near the highest intraday mark in more than five months. Airbus advanced 1.8% to 120.96 euros at the close in Paris.

A spokesperson for the Office of the U.S. Trade Representative didn’t immediately respond to a request for comment.

The WTO award is lower than the Trump administration’s request to impose tariffs on up to $11.2 billion worth of European exports stemming from the nearly 15-year-old dispute. The U.S. hasn’t finalized which goods it will hit, but the preliminary list also includes whiskey, motorcycles, leather handbags, cheese and wine.

The proposed list could damage the sustainability of Airbus’ U.S.-based operations -- like the A320 manufacturing facility in Mobile, Alabama -- because it targets more than $9 billion worth of American-bound exports of European aircraft, helicopters and parts.

The U.S. tariffs may also hit products made by Europe’s producers of luxury brands -- like LVMH Moet Hennessy Louis Vuitton SE, Christian Dior SE and Hermes International.

New Approach

The new U.S. tariffs mark a significant escalation in tensions with the EU, which has implemented retaliatory duties on 2.8 billion euros ($3.2 billion) of U.S. imports following Trump’s trade restrictions on foreign steel and aluminum.

The EU has also said it’s prepared to hit 20 billion euros of U.S. goods with tariffs if Trump follows through on the threat to impose duties on European cars and car parts.

Separately, the EU is weighing an aggressive new approach to its trade dispute with the U.S., and is considering imposing tariffs on more than $4 billion of U.S. exports, citing as justification a 22-year-old World Trade Organization dispute over prohibited subsidies, according to people familiar with the plan. This is despite the fact that the two sides reached a “mutually acceptable solution” to the claim in 2006.

European Trade Commissioner Cecilia Malmstrom said she advocated for a settlement that would avoid the tit-for-tat aircraft tariffs, but said that the U.S. never responded to the bloc’s offers.

“Our view is that we have enough tariffs in the world as it is, so imposing tariffs on each other, which strictly speaking we are allowed to do according to the World Trade Organization, would not be a good solution to this,” Malmstrom said Sept. 16.

“We have made a quite detailed proposal,” she said. “So far, unfortunately, the U.S. has not said that they are willing to negotiate.”

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