US Escalates Airbus Dispute, Hikes Tariffs on European Aircraft

Amid a nearly 16-year transatlantic battle over aviation subsidies, the U.S. government said on Friday that it will raise duties on airplanes imports from the European Union to 15% from 10%. This move will put further pressure on Brussels.

The Office of the U.S. Trade Representative stated that it was still willing to work with the EU to find a negotiated solution to the problem, but that it may change course if the EU applied tariffs of its own in relation to two disagreements over the subsidies.

USTR announced late on Friday that it will remove prune juice from the list of goods subject to 25% duties on cheese, wine, and other non-aircraft items from the EU, among other minor adjustments. The tariff rates on such products were not increased, despite its October suggestion that it may. The increased aircraft tax will go into force on March 18.

The American move occurs as the U.S. Inspired by the successful negotiation of a Phase 1 trade agreement with China, President Donald Trump has set his eyes on renegotiating the more than $1 trillion trade relationship between the United States and the European Union, increasing the possibility of a huge trade war as the world economy wanes.

EU representatives have stated that they wish to engage in talks with Washington but will not be coerced into doing so.

According to European aircraft manufacturer Airbus, the American action would hurt American airlines, which are already experiencing aircraft scarcity, and make it more difficult to negotiate a settlement of the long-running conflict with the European Union.

Given the possibility of EU duties on American goods in its own case before the World Trade Organization, Airbus said it would keep talking with US customers to "mitigate effects of tariffs insofar as possible" and hoped the USTR would reconsider.

Impact of WTO Ruling and Tariffs on the EU-US Trade Dispute

After the WTO decided that the EU's launch aid to Airbus was still hurting the US aerospace industry, the USTR indicated in December that it might raise tariff rates to 100% and impose duties on further EU exports.

In October, the WTO granted Washington the authority to apply duties on $7.5 billion worth of yearly imports from the EU as part of its legal dispute with Airbus. Then, starting on October 18, Washington imposed 25% charges on goods ranging from cheese to olives and single-malt whiskey, as well as 10% tariffs on the majority of Airbus aircraft built in Europe.

In a statement, Boeing stated that it was collaborating with federal and state authorities in the United States to "shortly bring the United States into full compliance" with WTO decisions.

The Wine & Spirits Wholesalers of America (WSWA) called on EU and US trade authorities to engage in negotiations to resolve a trade dispute that was reducing their revenue and stated that they are still adamantly against taxes on wine and spirits of European origin.

According to research, the organization commissioned, the 25% tariffs that were put into effect in October may cause the beverage alcohol industry to lose close to 36,000 jobs. Also according to the US Distilled Spirits Council, tit-for-tat taxes on alcoholic drinks are detrimental to businesses and customers alike.

It stated that according to recent U.S. government data, the spirit industry's exports to the EU, which is its biggest export market, decreased by 27% in 2019 compared to the previous year, while shipments of American whiskey to other countries fell by 16% during the same time frame.

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