The European Union said on Monday it would impose tariffs of up to $ 4 billion on US goods and services over illegal aid to aircraft maker Boeing – but expressed hope that trade relations would improve when President Donald Trump leaves office.
European trade ministers agreed on the move a few weeks after international arbitrators gave the EU the green light for such a sanction. The World Trade Organization had illegally assessed some US support for Boeing – which is a bitter rival to Europe’s Airbus – and said the EU could compensate it with a limited number of sanctions on US trade.
“Unfortunately, despite our best efforts due to the lack of progress on the part of (the United States), we can confirm that the European Union will exercise our rights later today and introduce countermeasures granted to us by the WTO,” EU Commission Executive Vice President Valdis Dombrovskis sade. The tariffs come into force on Tuesday.
The WTO had ruled that Boeing gained an unfair advantage over Airbus through tax breaks from the state of Washington, where Boeing once had its headquarters. However, following the WTO decision, the state repealed the tax breaks, which made EU complaints obsolete in the opinion of US officials.
“The United States is disappointed with EU action today,” said US Trade Representative Robert Lighthizer. “The alleged subsidy to Boeing was lifted seven months ago. The EU has long announced its commitment to comply with WTO rules, but today’s announcement shows that they only do so when it suits them. ”
A year ago, the WTO similarly ruled in favor of the United States and allowed the release of penalties on EU goods worth up to $ 7.5 billion – including Gouda cheese, single-malt whiskey and French wine – over European aid for Boeing rival Airport Bus.
After Trump also imposed tariffs on EU steel and aluminum and threatened penalties on cars, Europeans had hoped to keep tariffs on the Airbus-Boeing dispute alive. However, after repeatedly failing to reach a negotiated solution, the EU decided to impose its own punishment.
“We urge the United States to agree that both sides will release existing countermeasures with immediate effect so that we can quickly put this issue behind us,” Dombrovskis said. He refused to give exact details about the tariffs, which would be published in the official EU magazine later on Monday, but said they would beat, among other things, agricultural and industrial products.
“We are not escalating anything, we are exercising our rights,” Dombrovskis said, adding that the EU “reflects the American method” in the types of tasks it imposes.
German Economy Minister Peter Altmaier said that “this step was logical” and that most of the 27 EU member states agree.
Asked why the EU did not wait until Trump left office, Altmaier said: “US tariffs have already been valid for over a year. We will not know until around February or March exactly who in the new administration has the power to speak for this important area, so a solution must be found now in the hope that it can prevent a further escalation. ”
Europeans are hopeful that Trump’s tough trading position will ease when President-elect Joe Biden takes office in January. Dombrovskis welcomed Biden’s commitment to international alliances, the multilateral system and improving ties with the EU.
Altmaier expressed hope for more rule-based and less conflict-based transatlantic ties, saying that most European countries see Biden’s victory “as an opportunity for us to take a new approach to our trade relationship and to resolve the trade conflicts we have with the United States.” ”
As for tariffs on Boeing, the EU had previously released a preliminary list suggesting that it could go after a wide range of US products including frozen seafood, dried fruit, tobacco, rum and vodka, handbags, motorcycle parts and tractors.
The chairman of the US Distilled Spirits Council, Chris Swonger, said the new tariffs “will be a major blow” to the spirits industry, “especially craft distillers struggling to regain their position after the closure of distilleries, restaurants and bars due to COVID-19 . ”Whiskey exports to the EU have already fallen by 41% due to the bloc’s retaliation over Trump’s tariffs on steel and aluminum in 2018.
Europeans are still reluctant to increase trade tensions as the coronavirus pandemic ravages economies around the world.
About 16 million workers on both sides have jobs supported by transatlantic trade, the largest ratio in the global economy. Even before the pandemic hit, tariffs over the past four years have affected companies and people who manufacture and sell a variety of goods.
Boeing itself said last month that it will reduce 7,000 more jobs when the virus hits demand for new aircraft and drives it to a loss.
Peter Chase, a senior colleague at the German Marshall Fund, says that Europeans should have waited a few more months.
“They do not have to do this now. They do not have to disrupt trade, says Chase. Biden “will have many limitations and he must first work on domestic issues, both the COVID crisis and the economy. And he will have to do a lot of internal healing. And I think they should basically cut him a little slack. ”