US raises tariffs on European wines, spirits amid plane dispute

US will raise duties on European plane-making parts, some non-sparkling wines and cognac following EU measures in November.

The US and EU say they are discussing a negotiated solution to a dispute over subsidies for wide-body commercial aircraft that began 16 years ago [File: David Ryder/Bloomberg]

The Trump administration announced additional tariffs on some products from the EU as part of a long-running dispute over subsidies to aircraft makers Airbus SE and Boeing Co.

In November, the EU instituted duties on some $4 billion in trade from the U.S. after gaining approval from the World Trade Organization. A year earlier, the U.S. had imposed tariffs — also authorized by the WTO — on about $7.5 billion in imports from the EU and U.K. including French wine and Scotch whisky.

The U.S. Trade Representative’s office on Wednesday said it was amending some of its tariffs because the EU used a time period that affected “substantially more products than would have been covered” otherwise and that the EU “needs to take some measure to compensate for this unfairness.”

Although the U.S. “explained to the EU the distortive effect of its selected time period, the EU refused to change its approach,” the USTR said, resulting in the office instituting additional tariffs. The duties will include aircraft-manufacturing parts, certain non-sparkling wine, and certain cognac and other grape brandies from France and Germany, it said. The USTR didn’t provide a value for the extra duties, saying more details will be provided in a forthcoming Federal Register. Wednesday’s move marks yet another chapter in trans-Atlantic tit-for-tat tariffs that have already seen some $11.5 billion in trade targeted. It comes even as the two sides say they are discussing a negotiated solution to a dispute over subsidies for wide-body commercial aircraft that began almost two decades ago.

“In order to not escalate the situation, the United States is adjusting the product coverage by less than the full amount that would be justified utilizing the EU’s chosen time period,” the USTR said.Lighthizer and his European Commission counterpart, Valdis Dombrovskis, have both expressed their desire for a negotiated settlement and been engaged in discussions in recent weeks. But the latest move reflects Lighthizer’s skepticism that such a deal can be done with less than a month left in the Trump presidency and that the EU may be holding out to deal what they see as a more accommodating Biden administration.

President-elect Joe Biden and top advisers have signaled their desire to repair trade and other relations with allies including the EU that have been strained by Trump’s “America First” policies.

Both Airbus and Boeing have been hit hard by the pandemic and its impact on air travel. A recent surge in Covid-19 cases in both Europe and the U.S. has also increased the likelihood of a double-dip recession in the EU and a slowing recovery in the U.S. economy. That could prolong the pain for both aircraft makers and raise the economic stakes for their home countries.

Source: Bloomberg