Trade war between the US and Europe escalates! EU will impose tariffs on US $4 billion

category:Finance
 Trade war between the US and Europe escalates! EU will impose tariffs on US $4 billion


However, the amount is only one-third of the $12 billion that the EU is seeking in the litigation. Last year, when the WTO ruled on the Airbus subsidy case, it allowed the United States to formally impose tariffs on US $7.5 billion worth of EU exports to the United States on October 18 last year. In February this year, the tariff on EU large civil aircraft was raised from 10% to 15%.

At present, the office of the US trade representative and the European Union office in Washington have not responded to this. At the same time, Airbus and Boeing have so far declined to comment, saying the ruling remains confidential. But Boeing accused Airbus of ignoring its recent decision to give up Washington state tax breaks.

Airbus recently announced its own financial incentives for France and Spain, but they have not yet been offered immediately.

In October 2019, the WTO ruled that the United States has the right to impose tariffs and other measures on the EUs illegal subsidy to Airbus Europe, which is about US $7.5 billion per year.

Photo source: Reuters

After the announcement of the ruling, the United States announced to impose 10% tariff on EU made aircraft and 25% tariff on some EU agricultural products and other products. In February 2020, the United States will raise the tariff on aircraft to 15%, while the tariff on other goods will remain unchanged.

According to the tax list previously released by the office of the U.S. trade representative, commodities cover a wide range, including aircraft, whisky, coffee, cheese, frozen meat, butter, yogurt, various clothing and blankets. Many European countries, including Britain, France, Germany and Spain, will be affected (at that time, Britain has not yet left Europe).

EU Trade Commissioner Malmstrom said earlier that the EU regrets the US decision to raise tariffs again. This leaves the EU with no choice but to retaliate against Boeings illegal subsidies.

In July 2020, the European Union demanded that the United States immediately cancel the tariff on Airbus. At that time, EU Trade Commissioner Phil Hogan said that the WTO would soon make a ruling on the EUs prosecution of us Boeings illegal subsidies. If the United States is not willing to reach a settlement with the EU, the EU will reserve the right to take sanctions against the United States.

The entanglement between the US and Europe over the Boeing Airbus trade began 16 years ago

As early as 1992, the United States and Europe reached an agreement on Trade and subsidies for large civil aircraft. The agreement stipulates that the governments direct subsidy to large civil aircraft R & D shall not exceed 33% of aircraft R & D cost, and the indirect government subsidy (such as subsidies provided by the National Aeronautics and Space Administration and the Ministry of defense or tax incentives) shall be limited to 3% of the turnover of the national large civil aircraft industry. At that time, Airbuss market share was much lower than that of Boeing.

With Airbuss market share rising rapidly and surpassing Boeing in 2003, the U.S. government believes that the 1992 agreement has lost its function, so it unilaterally tore up the agreement. On October 6, 2004, the United States filed a lawsuit with the WTO, accusing the EU of providing illegal subsidies to Airbus in various forms. The European Union later sued the U.S. government for illegal subsidies to Boeing.

The dispute reached a climax in 2010 and 2011, when the WTO ruled that both the EU and the US had the problem of providing illegal subsidies to their respective airlines.

In 2010, the WTO asked the EU to stop providing excessive assistance to aircraft including Airbus A380. In 2011, the World Trade Organization ruled that NASA and state governments should ban the provision of financial support to Boeing. In 2012, both the European Union and the United States said they had complied with the relevant rulings, pointing out that the other side had not complied.

In 2013, Boeing announced the launch of the twin engine 777x aircraft, and announced that it would continue to use tax breaks to build aircraft.

In 2018, the United States threatened to impose taxes on billions of dollars of European products, starting a trade war between the two sides on the taxation of imported goods.

According to the ruling result and formal authorization of WTO on Airbus subsidy case, the United States formally imposed tariffs on US $7.5 billion EU exports on October 18 last year. The WTO will also announce a decision in the next few weeks to allow the EU to impose tariffs on US goods worth $4 billion.

Both sides may declare their victory

According to first financial news, although the US side proposed that the legislature of Washington state had abolished the preferential tax relief policy for aerospace launched 16 years ago in March this year, WTO arbitrators said that the United States indeed provided Boeing with illegal subsidies through this tax reduction policy, which was not conducive to the sales of Airbus commercial aircraft. According to foreign media reports, the policy saved Boeing about 118 million U.S. dollars in 2018 alone, based on the revenue of its jetliner.

The ruling also shows that the WTO believes that both the United States and the European Union have the problem of providing unreasonable subsidies to their respective aviation enterprises. But both the US and Europe are expected to claim that the WTO ruling marks their own victory.

Us sources pointed out that the higher core tariff is beneficial to Boeing. The European side said that the ruling does not include the US $4.2 billion tariff imposed on the United States in previous cases, so the EUs tariff increase on the United States can reach $8.2 billion.

The United States said a ruling previously granted to the European Union in retaliation for special tax treatment on US exporters, which the EU has never applied, is no longer valid because the law establishing the contentious regime was repealed in 2006.

The WTO refused to fall into the dispute over unused tariffs, saying it had not increased its ruling on the previous US foreign sales company system.

However, the amount awarded by the WTO to the European Union is indeed far less than the compensation won by the United States last year. Airbus shares rose 2.55% to 63.66 euros at 15:10 Beijing time, while Boeing rose 1.01% to $165.26.

The key question is whether the EU will act quickly to impose tariffs on the United States? Sources from both sides said that EU tariffs on Boeing aircraft and other products still have to be formally confirmed by the WTO, so it is unlikely to be imposed before the US presidential election on November 3. After all, the EU is also trying to avoid intensifying disputes.

According to sources, the European Union is expected to announce retaliatory tariffs of up to 100% on US Commodity Lists, including aircraft, helicopters, tractors, tobacco, rum, wine and orange juice.

Analysts say the long-awaited EU anti-tariff ruling may eventually ease years of stalemate, during which both sides expressed interest in resolving the aircraft dispute and accused the other party of refusing to discuss it seriously.

Everyone is waiting for the news. It laid the foundation for the negotiations. Said William Reinsch, a former senior official at the U.S. Department of Commerce and a trade expert at the Council for strategic and international studies. Guillaume faury, Airbuss chief executive, said in June that he hoped Boeing would return to the negotiating table after the EU was authorized to make U.S. cuts, because both sides had similar pain, so no one was interested in staying in this situation.. The consequences of sanctions are not limited to aircraft manufacturing. Since October 2019, the United States has imposed a 25% tariff on some food, wine and spirits in the European Union. These tariffs have hit French wine, Italian cheese and single malted Scotch, as well as French biscuits, sausages, yogurt, olives, pork sausage produced by the European Union and German coffee. The Scotch Association called for a settlement before the tariffs caused irreparable damage.. The U.S. distilled spirits Council also said the tariff would cause additional damage to the hotel industry which has suffered losses during the outbreak. The daily economic news integrates CCTV finance and economics, overseas network, first finance and economics, and Reuters. Source: daily economic news editor in charge: Zhang Mei_ NF2100

The consequences of sanctions are not limited to aircraft manufacturing. Since October 2019, the United States has imposed a 25% tariff on some food, wine and spirits in the European Union. These tariffs have hit French wine, Italian cheese and single malted Scotch, as well as French biscuits, sausages, yogurt, olives, pork sausage produced by the European Union and German coffee.

The Scotch Association called for a settlement before the tariffs caused irreparable damage.. The U.S. distilled spirits Council also said the tariff would cause additional damage to the hotel industry which has suffered losses during the outbreak.

Daily economic news comprehensive CCTV finance and economics, overseas network, first finance and economics, Reuters