• Bryan

Trump Now Threatening Damaging Tariffs on EU

President Trump once again deploys his favourite economic weapon in trying to try intimidate a competitor. 

Just when the markets thought they had caught a break with the ceasefire in the US-Chine tensions, a new front line appears to be opening up with Trump threatening the EU with new tariffs. 

The current tension with the EU is not new, but is a long-running dispute over alleged subsidies the US claims the EU gives to Airbus.

The issue of subsidies goes back to 2004 when Boeing challenged the EU over $22 billion in subsidized loans given to Airbus - it was claimed the soft loans were used in the development of Airbus's A380 and A350. Boeing took the dispute to the WTO and in 2011 there was a preliminary finding in favour of Boeing's claim.

However, the US insisted that the EU, France, Germany, Spain and the UK had not taken adequate action to withdraw subsidies to Airbus, or alternatively counter the detrimental economic impact of those subsidies on Boeing.

In a further ruling in 2018, the WTO dismissed an appeal by Airbus, saying that the plane manufacturer had not acted to rectify the harm done by the subsidies to its rival Boeing.

The implication of the WTO ruling last year is that the US is now authorised to impose retaliatory sanctions against the EU, and the figure for the retaliatory sanctions will be determined in another WTO decision.

The sanctions could be applied to a range of EU goods, and President Trump is now considering tariffs on $4 billion worth of EU goods including meat, cheese, pasta, fruits, coffee and whisky.

These proposed tariffs are subject to public consultation in the US, as well as arbitration by the WTO.

The EU has expressed concern at the situation, and has indicated its desire negotiate. However, you can bet the bloc will retaliate if and when the tariffs are applied. 

This situation could only put further pressure on the US-EU relationship, which has suffered since President Trump assumed office.