US to impose retaliatory tariffs on European goods following the EU’s continuous subsidies to Airbus

US to impose retaliatory tariffs on European goods following the EU’s continuous subsidies to Airbus
  • WTO rejects EU's claim that Airbus is no longer subsidized.
  • USTR announces additional retaliatory tariffs on a broader range of EU goods.
  • EU's similar case against Boeing is pending decision to be announced in 2020.
  • EU subsidies are causing market distortion leading to Boeing's loss in sales and market share.

The European Union (EU) had previously claimed that Airbus no longer receives subsidies from the European government. Upon rejection of the claim by the World Trade Organization (WTO), the United States of America announced on Monday that it plans on imposing additional retaliatory tariffs on a number of European goods.

Geneva Trade Watchdog Highlights Airbus A380 And A350 Still Receive Subsidies

Due to the past loans, the European government still subsidizes Airbus A380 and A350 jetliners, as highlighted by the Geneva trade watchdog in its recent compliance report. U.S Trade Representative (USTR), Robert Lighthizer, stated on Monday that the European subsidies to the plane manufacturer have been weighing on the United States’ aerospace industry, and the U.S intends to firmly retaliate against such unfair market distortion.

The trade dispute concerning claims of illegal aircraft subsidies from both sides has been a hot debate in the financial markets in 2019. Washington’s case against Airbus had seen it win the right to increase tariffs on European goods worth $7.5 billion. Products ranging from olives to cheese, and single-malt whiskey to multiple Airbus jets were hit by the tariff hike in October.

On the other hand, the European Union’s case circling aid for Boeing is pending decision on the EU’s right to retaliation. The decision is expected to be announced in 2020. While both the U.S and EU representatives have expressed confidence in a negotiated settlement, each continues to blame the other for being nonserious regarding such a solution.

Airbus To Shut A380 Production In Mid 2021

Airbus recently announced that it will no longer be producing the A380 jetliner that met with slow sales in the past few years. WTO’s panel, however, commented on Monday that the EU’s announcement doesn’t imply that it no longer remains a threat for the American multinational plane manufacturer, Boeing; as A380’s competitor, Boeing 747, has also been rendered obsolete.

In its report, WTO further added that with Airbus announcing its superjumbo to go out of production in the second half of 2021, Boeing will continue to lose its market share in the meantime.

In the long-haul, twin-engined market that is much busier than the superjumbos, impedance has caused Boeing’s 787 Dreamliner, to have lost sales and market share, as per the WTO.

USTR had previously imposed 25% tariffs on the selected European goods while the EU aircraft saw a 10% increment. Following the recent development, the USTR said that a broader range of goods imported from Europe will now be subjected to tariffs and at a higher rate than previously imposed.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.
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