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April 10, 2019

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Now, Trump threatens to hit EU with US$11b in new tariffs

Source: Agencies | 00:00 UTC+8 April 10, 2019 | Print Edition

The United States wants to put tariffs on US$11.2 billion worth of EU goods 鈥 from airplanes to Gouda cheese and olives 鈥 to offset what it says are unfair European subsidies for plane maker Airbus.

While the size of the tariffs is small compared with the hundreds of billions the US and China are taxing amid their trade tensions, it suggests a breakdown in talks with the European Union over trade at a time when the economy is already slowing sharply.

The US and EU have been negotiating since last year about how to avoid tariffs that US President Donald Trump has wanted to impose to reduce a trade deficit with countries like Germany. But experts warn that tariffs lead to higher consumer prices in countries that impose them and can hurt overall economic growth.

The US Trade Representative鈥檚 office released late Monday a list of EU products it would tax in anticipation of a ruling by the World Trade Organization this summer.

The US in 2004 complained to the WTO, which sets the rules for trade and settles disputes, that the EU was providing unfair support to Airbus. The WTO ruled in May last year that the EU had in fact provided some illegal subsidies to Airbus, hurting US manufacturer Boeing.

The US expects the WTO will say this northern summer that it can take countermeasures to offset the EU subsidies. It will now start a consultation with industry representatives on the list of EU goods it wants to tax so that it can have a ready list.

鈥淭he EU has taken advantage of the US on trade for many years. It will soon stop!鈥 Trump tweeted yesterday.

The US move, while following international trade rules, appears to reflect broader US frustration at the slow pace of talks on trade with the EU.

Trump in June last year imposed tariffs of 25 percent on steel imports and 10 percent on imported aluminum from the EU in a move that seems aimed at helping the US industry but has also raised costs for many businesses that import these products.

The EU responded with tariffs on about 2.8 billion euros (US$3.4 billion) of US steel, agricultural and other products, from Harley Davidson bikes to orange juice.

The US and the EU have since July been in talks to scale back the tariffs, with Trump holding out the bigger threat of slapping tariffs on European cars 鈥 a huge industry in the region 鈥 should the negotiations not yield a result. US officials have repeatedly expressed frustration at the slow pace of the talks.

The EU responded yesterday to the US鈥 latest call for new tariffs by noting that it was based on its own estimate, not anything it had been awarded by the WTO. It also said the EU is preparing its own retaliation based on a separate WTO case, in which Boeing was found to have received illegal support from the state of Washington. It did not say how big that retaliation might be.

The US attempt to tax Airbus jets comes just as Boeing is facing challenges over the global grounding of its 737 MAX.

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