President Trump’s plan to tack tariffs onto $11 billion in European imports isn’t a new front in his global trade war. It’s the latest skirmish in an ongoing battle between the planet’s biggest plane-makers, which began the same year the president started firing contestants on NBC’s “The Apprentice.”
The tariffs have the potential to roil negotiations between the European Union and the United States, which have already stalled over Washington’s push to include crops in a new trade agreement.
Trump, who has complained repeatedly about an imbalance between American imports and exports that reached $622 billion in 2018, has attempted to wipe it out through tariffs on steel and aluminum, which offended traditional allies from Europe to Canada and Mexico, as well as imposing duties on $250 billion in Chinese imports and threatening charges on cars and car parts.
That’s a possibility that Europe, home to carmakers such as BMW and Mercedes with U.S. operations that rely on a global supply chain, is working to avoid by reaching a trade deal with Trump. The White House’s decision to move forward with the Airbus levies “could undermine the fragile negotiations before they have even begun,” said Chris Krueger, an analyst with Cowen Washington Research Group, which has tracked federal policy for the past four decades.
The EU pointed out on Tuesday that the World Trade Organization, which determined that the region unfairly gave Boeing rival Airbus $18 billion in subsidies over a 38-year period, has yet to sign off on the amount of the U.S. tariffs, and a spokesman said the trading bloc is preparing to respond in kind.
While it isn’t allowed to retaliate for American action in response to the Airbus support, which the U.S. first complained about in 2004, the EU won a separate 2005 claim before the trade group. Its case argued that the U.S. gave Boeing $5 billion to $6 billion in support from 1989 to 2006, for which the EU would be allowed to penalize Washington.
The bloc “remains open for discussions with the U.S.,” a spokesman noted, “provided these are without preconditions and aim at a fair outcome.”
The duties proposed by the U.S. would cover wine, cheese, olive oil, and helicopters, in addition to commercial jets from Airbus, according to a list from U.S. Trade Representative Robert Lighthizer.
“This case has been in litigation for 14 years, and the time has come for action,” Lighthizer said in a statement. “When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted.”
The White House may have decided to move ahead with the tariffs now partly because of frustration with the World Trade Organization’s March 28 decision in favor of the European claims about Boeing, said Krueger.
The ruling was a “clear victory for the EU and Airbus,” the French plane-maker’s General Counsel John Harrison said afterward.
“It vindicates our position that Boeing, while pointing fingers at Airbus, has not taken any action to comply with its World Trade Organization obligations,” he said. “We hope that these findings will prompt the United States and Boeing to move forward constructively in this long-standing dispute and join us in working towards a fair-trade environment.”
As for the U.S. tariff proposal from the other case, Airbus called it “unjustified” and said its claims against Boeing would justify “far larger countermeasures” from Europe. “This all leads to unnecessary trade tensions, and that shows the only reasonable solution is a negotiated settlement,” Airbus said.
Trump, who touted the victory for the U.S. and Boeing on Twitter, said Washington’s response shows his commitment to keeping other countries from taking advantage of America, a policy which will overshadow trade negotiations with Europe. Trade chief Lighthizer has insisted that the bloc include its $32.5 billion in agriculture trade with the U.S. in any new agreement, a possibility that Europe has resisted, in part because of tariffs intended to support the region’s growers and bans in 19 of its countries on genetically modified crops.
“The U.S. can’t have a trade agreement with Europe that doesn’t deal with agriculture; their view is that they can’t have one that does,” Lighthizer told the Senate Finance Committee in March. “We’re at a complete stalemate. We’re working on other areas with the realization that there’s not going to be any free-trade agreement without agriculture. Congress wouldn’t go along with that.”
The standoff has left Trump increasingly frustrated, and he’s known to prefer “coercive measures — trade sanctions, investment restrictions, export controls — that project strength” and don’t require congressional approval, Krueger said.
The president’s negotiating tactics have often included making threats ahead of talks, Krueger added, and with the European Union formalizing the boundaries of trade talks for its negotiators, “what better time to turn up the heat?”
