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 EU 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.
Airbus on Tuesday said "this only adds to the trade tensions but in reality does not change anything." The level of retaliation is set by the WTO, the European plane maker said, adding the U.S. move made negotiating a solution harder and could result in a "lose-lose situation" for industries on both sides.
Boeing did not immediately respond to a request 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 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 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 EU remains open for discussions with the U.S.," a European Commission spokesman said Tuesday. The EU's executive arm declined to comment on procedural steps by the USTR, highlighting that the final award is still to be decided. Brussels also reiterated that barring a settlement it is ready to "promptly" retaliate against the U.S., once the WTO finalizes penalties in the bloc's case against Boeing. The EU award is expected early 2020.
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 the effects of the tariffs.