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US mulls $3.1bn of tariffs on EU goods in aircraft subsidy row

EU and US flags in aircraft subsidy dispute

A 16-year aircraft subsidy dispute will see The United States applying pressure on the European Union by flagging possible changes in tariffs on EU goods, as the date for a decision on reciprocal EU duties was moved to the autumn.

The aircraft subsidy dispute over Europe’s Airbus and US rival Boeing comes as the aerospace industry deals with an unprecedented decline caused by coronavirus crisis lockdowns. Even extensive government measures taken to aviation via airlines or suppliers as well as furlough schemes have not been able to soften the dire effect the ban on air travel has had.

Airline chief executives and analysts alike forecast it will take up to three years for the industry to return to 2019 profit levels.

The US Trade Representative’s office added items valued at $3.1bn to its list of European goods eligible for duties – including black olives, beer and gin. Other items on a previously published list will also be revisited and existing duty levels are expected to be raised further.

Despite leaving the European Union (EU) Britain remains part of the aircraft subsidy dispute as one of four Airbus core nations. On Wednesday, it urged Washington not to impose more tariffs in a move that will hurt businesses on both sides of the Atlantic.

A spokesman for the European Commission, the EU’s executive body, said Washington’s approach could exacerbate problems caused by the coronavirus, and might even “go beyond what is authorized under the WTO.” The EU’s priority remained finding a negotiated solution, he said.

The US move is part of a “carousel” approach aimed at maintaining pressure on the EU to reach a settlement and end the airline subsidy dispute that dates back to 2004.

Both sides have won partial victories at the World Trade Organization (WTO), and have shown interest in settling the matter, but are waiting for the final rulings, according to sources familiar with the talks.

The latest development comes after the WTO allowed the US to levy tariffs on $7.5bn worth of EU goods last year, including aircraft, wines and cheese. This decision came because of Airbus subsidies that it had deemed illegal.

Now it is considering the level of tariffs that the EU could impose in a parallel case involving illegal support for Boeing.

That decision, initially expected in May or June, has been pushed back to at least September due to the coronavirus health crisis. The WTO declined to comment.

The timing raises the possibility that the EU would be allowed to impose its own tariffs on US goods ahead of the November US Presidential election. However, such a measure is unlikely as foreign states tend to avoid taking high-profile moves during key campaigns.

Analysts say both sides share an interest in settling the aircraft subsidy dispute to set an example in the looming trade war with China, which is developing its own passenger jets.

For now, each side claims to have abided by the WTO’ guidelines while accusing the other of ignoring thousands of pages of rulings.

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Galina Mikova

Galina is a Hubspot-certified Technical Writer with over 10 years of experience in working with Fortune 500, private investment, banking, FOREX and niche tech companies as well as crypto and blockchain startups. She has a solid background in FinTech and blockchain technology.

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