Is the end in sight to the EU vs US tariff war? Airbus makes a significant move to break impasse

Mon 27 Jul 2020
Posted by: William Barns-Graham
Trade News


European aircraft manufacturer Airbus is moving to end EU subsidies in a bid to end the damaging tariff war between the trade bloc and the US.

The dispute centres around ‘launch aid arrangements’ – an export loan that helps manufacturers develop new models – which France and Spain have provided for its A350 wide-bodied jet.

The WTO last year ruled that the loan was a subsidy, paving the way for the US to impose retaliatory tariffs on EU exports – including a 25% tariff on Scotch whisky.

“After 16 years of litigation at the World Trade Organization, this is the final step to stop the long-standing dispute and removes any justification for US tariffs,” Airbus said in a statement on Friday (24 July).

Damaging tit-for-tat tariffs

The UK has also been found to have provided Airbus with subsidies, though the UK government said in February that the loans it provides the firm are now compliant with WTO rules on state-aid.

Nonetheless, the UK has been on the receiving end of the tariffs imposed on EU goods by the Trump administration since October 2019.

These include a 25% duty on UK exports of single malt scotch, pork, biscuits, cheese and other dairy products.

The measure had an immediate effect on UK food and drink exports to the US, with sales falling by a 6.7% in Q4 2020, according to figures from the Food and Drink Federation.

The EU responded by imposing its own tariffs on popular US exports, including malt whiskeys, bourbon, motorcycles and games consoles.

A public consultation in the US into further tariffs concluded yesterday (26 July) amid rumours of a 100% tariff on EU goods including Scotch whisky.

The UK is seeking to remove the tariffs as part of its negotiations for a trade deal with the US.

WTO ruling on US-Boeing

The EU also accuses the US of providing state aid to Boeing, with the WTO expected to rule in September on whether this constitutes a subsidy.

As with the ruling on Airbus, the WTO’s verdict on US subsidies will determine how far the EU could go with its own retaliatory tariffs.

Airbus olive branch

Airbus has offered to “amend” its contracts with the French and Spanish governments in an attempt to “remove the last contentious point” of disagreement with the US.

It will adjust the state-back loans to “what the WTO considers the appropriate interest rate and risk assessment benchmarks”.

The firm says the current tariffs are “harming all targeted industry sectors, including US airlines, and are adding to a very difficult environment as a consequence of the Covid-19 crisis”.

The FT reports that the move has been welcomed by Brussels which has sought to put an end to the crisis.

EU trade commissioner Phil Hogan said: “Unjustified tariffs on European products are not acceptable and, arising from the compliance in the Airbus case, we insist that the United States lifts these unjustified tariffs immediately.”