WTO awards US right to hit $7.5 billion of EU goods over Airbus subsidies

The US yesterday won approval to impose tariffs on $7.5 billion worth of European goods over illegal EU subsidies handed to Airbus.

The move threatens to trigger a tit-for-tat transatlantic trade war as the global economy falters.

The decision by the World Trade Organization pushes a 15-year corporate dispute over illegal support for transatlantic plane giants to the centre of caustic world trade relations and comes on top of a tariff war between the US and China.

The European Commission said in response that a US move to impose trade sanctions on EU imports would be “short-sighted and counterproductive” and risked causing damage on both sides of the Atlantic.

The WTO has found that both Europe’s Airbus and its US rival Boeing received billions of dollars of illegal subsidies in the world’s largest corporate trade dispute, a legal marathon dating back to 2004.

The two cases are expected to lead to tit-for-tat tariffs, beginning with the US measures, posing new problems for businesses and financial markets around the world.

The focus of nervous markets will now shift to Washington where the US Trade Representative is expected to move quickly to narrow down a preliminary list of goods in line for tariffs, a US source said.

US Airways operates 40 Airbus A320-231 aircraft

The agency’s provisional list of products that are eligible to be targeted with tariffs ranges from Airbus jets themselves to helicopters, wine, handbags and cheese.

Before any tariffs can be imposed, the WTO’s Dispute Settlement Body must formally adopt the arbiters’ report in a process expected to take between 10 days and four weeks.

Its next scheduled meeting is on October 28, but Washington could request a special meeting 10 days after the arbiters’ report is published, suggesting an earliest possible final nod on October 12.

In the largest case ever handled by the WTO, Washington had requested permission to impose tariffs on up to $11.2 billion of EU goods.

Brussels is pushing for tariffs of around $10 billion on American goods in a parallel process to be decided by the WTO early next year.

While the level of tariffs amounts to less than three days worth of annual trade between Europe and the US, importers led by US airlines that buy Airbus jets have urged Washington to be selective when choosing industries to hit in order to avoid causing collateral damage to the US economy.

The WTO award in the dispute could fuel rising trade tensions, diplomats say.

EU manufacturers are already facing US tariffs on steel and aluminium and a threat from US President Donald Trump to penalise EU cars and car parts. The EU has in turn retaliated.

The Trump administration has concluded tariffs were effective in bringing China to the negotiating table over trade, and in convincing Japan to open its agricultural market to US products.

Washington is unlikely to skip the opportunity to implement tariffs in the case over aircraft subsidies, according to current and former U.S. officials.

Airbus has said this would lead to a “lose-lose” trade war and has published a video stressing its contribution to the US industry through local assembly plants and 4,000 direct jobs, headlined “Together, let’s keep American aerospace great”.