WTO gives EU green light to slap tariffs on $4bn of US exports

The European Union won permission on Tuesday to impose tariffs on $4bn of United States goods in retaliation against subsidies for planemaker Boeing, deepening a record trade spat that has already seen Washington place duties on EU imports.

The tariff award, which confirms a decision first reported by Reuters news agency on September 30, threatens to stoke transatlantic trade tensions just three weeks ahead of the US presidential election.

However, negotiators on both sides say it could also lead at last to discussions to resolve a 16-year legal battle.

Both the US and the EU have signalled interest in settling the dispute over subsidies each provided to their respective planemakers, Boeing and Airbus, while accusing the other of refusing to talk seriously.

Tuesday’s decision, delayed by the COVID-19 pandemic, follows a World Trade Organization (WTO) ruling last year allowing Washington to impose tariffs on $7.5bn in EU goods over state support for Airbus, which has sites in Britain, France, Germany and Spain.

Combined, the two cases represent the world’s largest-ever corporate trade dispute.

The state of Washington has since moved to repeal tax breaks that benefitted Boeing, while Airbus has announced it will increase loan repayments for the A350 plane to France and Spain in bids to settle the matter.

Boeing shares fell by two percent.

The US planemaker said there was no basis for the EU to impose the tariffs because the planemaker had already complied with WTO findings, making any penalties impermissible.

Airbus, which also claims to be have obeyed WTO rulings, said global trade judges had “spoken” and that the EU could therefore impose tariffs, while calling for an agreed solution.

The European Commission said it would pull back from imposing tariffs if Washington withdrew tariffs on European goods such as wine and whisky. There was no immediate comment from the US Trade Representative.

The commission has drawn up a list of US products it could target including planes, wine, spirits, suitcases, tractors, frozen fish, and produce from dried onions to cherries.

The earliest it could act is after a WTO meeting on October 26, but few analysts expect it to do so before the US election.

Ryanair

The $4bn tariff window means European airlines that import Boeing jets could have to pay tariffs expected to match US border taxes on Europe-built Airbus jets, currently 15 percent.

But Boeing’s top European customer Ryanair has called on Boeing to pay the tariffs and is expected to use this as leverage in negotiations to buy more of its grounded 737 MAX.

Both sides are expected to present the outcome as a full or partial victory as they seek maximum advantage before negotiating an end to the dispute.

On top of Tuesday’s $4bn, European sources have said the EU could also use dormant tariffs on a further $4bn of US products left over from an earlier case, giving it firepower similar to that which Washington is able to use.

Dismissing this, US sources say the previous award, allowing the EU to retaliate against former perks for US exporters, is no longer valid and that the balance of awards demonstrates Airbus is more to blame for distorting trade.

Consuming thousands of pages of testimony and an estimated $100m in costs since 2004, the aircraft spat has tested the resolve of the WTO, which is busy selecting a new leader.