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U.S. Proposes More European Tariffs Pending Airbus Case

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07/01/2019 | 08:29pm EDT

By Joshua Zumbrun

The U.S. widened its threat to impose tariffs against the European Union, pending the outcome of a World Trade Organization case over the EU's subsidies of the airplane manufacturer Airbus SE.

The Office of the U.S. Trade Representative said Monday that as part of a long-running dispute over aircraft subsidies it would consider tariffs on an additional 89 items with an annual trade value of $4 billion, including cheese, pasta and Scottish and Irish whiskies as well as chemicals and metals. The U.S. in April began the process of imposing tariffs against the EU pending the resolution of a WTO case that found the aircraft manufacturer has received unfair governmental support. The European Union has proposed tariffs against the U.S. over a companion case regarding U.S. subsidies of Boeing Co.

The announcement expands the USTR's earlier threat, and now leaves items with a trade value of about $21 billion a year under consideration for tariffs, according to the statement. The Trump administration has largely sought to portray these tariffs as separate from their other trade efforts, saying that these tariffs are part of a distinct dispute over aviation subsidies, and not part of the overall effort to apply pressure to the EU to negotiate a broad trade deal.

Neither Airbus nor Boeing immediately responded to requests for comment.

The European Commission's president, Jean-Claude Juncker, and President Trump agreed to negotiate a trade pact last summer, but the two sides have made little progress in their negotiations. Even if the Airbus-Boeing spat is largely separate from other trade issues, the threat of tariffs hasn't been conducive to progress in those talks.

The issue between the aircraft companies, however, predates President Trump by over a decade. The EU and U.S. have been tangling before the WTO for about 15 years over dueling claims that airline manufacturers are unfairly subsidized. The WTO has found that both sides unfairly subsidize their aircraft and may make a decision later this year that would allow the U.S. and EU to impose tariffs as countermeasures to these unfair subsidies. The WTO will also rule on the extent of harm caused by the subsidies, which would determine the size of tariffs that would be permissible in response.

These tariffs differ from most others pursued by the Trump administration because they would be imposed in response to an official WTO ruling, rather than being unilaterally initiated by Washington. The tariffs in place against China, for example, stemmed from a U.S.-initiated investigation into China's intellectual-property practices, which provided legal justification for the administration to impose tariffs, so far, against roughly $250 billion in imports. The U.S. tariffs against global steel and aluminum imports were initiated by Washington with the official justification that steel and aluminum imports threatened U.S. national security.

While some of the administration's tariffs have had few supporters, the WTO case against Airbus has been supported by Boeing. When the tariffs were first announced in April, the aircraft manufacturer said it supported the USTR's efforts to "level the playing field."

Experts on the WTO's litigation process don't expect the final scale of tariffs to be as large as that proposed by the U.S. and EU.

The USTR said its final list of tariffs "will take into account the report of the WTO Arbitrator on the appropriate level of countermeasures to be authorized by the WTO."

Before imposing the tariffs, the USTR will hold a public hearing Aug. 5, when companies can testify about their effects.

Stocks mentioned in the article
ChangeLast1st jan.
AIRBUS SE 1.46% 127.9 End-of-day quote.52.72%
AIRBUS SE 0.00%End-of-day quote.0.00%
AIRBUS SE -1.05% 126.66 Real-time Quote.52.45%
BOEING COMPANY (THE) 2.48% 339.99 Delayed Quote.2.87%
BOEING COMPANY (THE) -0.71% 330 Delayed Quote.3.18%
CHEESE FUTURES (CSC) - CMG (ELECTRONIC)/C1 -0.05% 1.829 End-of-day quote.32.63%
LME ALUMINIUM CASH -0.31% 1751 End-of-day quote.-5.76%
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Financials (EUR)
Sales 2019 70 329 M
EBIT 2019 6 952 M
Net income 2019 4 732 M
Finance 2019 14 745 M
Yield 2019 1,67%
P/E ratio 2019 21,1x
P/E ratio 2020 17,5x
EV / Sales2019 1,21x
EV / Sales2020 1,11x
Capitalization 99 520 M
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Last Close Price 128,00  €
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Thomas Enders Chief Executive Officer & Executive Director
Denis Ranque Non-Executive Chairman
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Sector and Competitors
1st jan.Capitalization (M$)
AIRBUS SE52.45%110 430
BOEING COMPANY (THE)2.87%191 316
TEXTRON-2.67%10 374
EMBRAER S.A.-16.33%3 311