EU Braces for U.S. Tariffs Over Airbus and Vows to Retaliate

(Bloomberg) --

European Union officials appeared to lose hope of dodging additional punitive U.S. tariffs, as the bloc’s calls for a negotiated settlement over aircraft subsidies have gone unanswered by President Donald Trump’s administration.

EU’s trade chief Cecilia Malmstrom told reporters in Brussels that she expects the World Trade Organization to unveil a specific figure this week, authorizing the U.S. to hit the bloc with import duties in retaliation for illegal subsidies to Airbus SE. “We have not received a positive response” to proposals for a settlement, Malmstrom said after a meeting with EU trade ministers on Tuesday.

The additional tariffs are expected as soon as this month, Malmstrom said. If that happens, the EU will respond in kind when the WTO rules early next year on the bloc’s dispute over U.S. subsidies to Boeing Co.

Europe is also looking “at all options,” including retaliation based on old WTO dispute rulings with which the U.S. isn’t complying, though no decision has been made, Malmstrom said, adding that any response would be compliant with WTO rules.

Europe’s relationship with the U.S. has been strained by Trump’s “America First” foreign policy:

  • Washington has blocked appointments to the WTO’s appeals board, which will paralyze the dispute-settlement forum in December
  • Controversial U.S. duties on Spanish olives pose a threat to Europe’s system of farm aid
  • Disputes over aircraft subsidies and auto tariffs over the next two months could push the transatlantic allies to an all-out trade war

“There’s always a risk that things will escalate,” Malmstrom said, adding that the WTO decision over the subsidies to Airbus “may come tomorrow.”
The WTO will authorize the U.S. to impose tariffs on nearly $8 billion of European goods due to illegal state aid provided to the aircraft maker, Bloomberg reported last week. The U.S. duties will target planes and parts as well as luxury products such as wine and spirits like Dom Perignon and Moet & Chandon -- and leather goods under labels such as Givenchy and Louis Vuitton, according to a list published by the U.S. Trade Representative’s office.

When it comes to trade, Trump has said he sees the EU as “worse than China, just smaller.”

©2019 Bloomberg L.P.

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