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U.S. widens trade war with tariffs on Airbus planes, French cheese, Scotch whisky

Stock Markets Oct 02, 2019 06:28PM ET
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© Reuters. FILE PHOTO: An Airbus A350 takes off at the aircraft builder's headquarters in Colomiers near Toulouse
 
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By Tim Hepher, Philip Blenkinsop and David Lawder

LONDON/BRUSSELS/WASHINGTON (Reuters) - The United States on Wednesday said it would enact 10% tariffs on European-made Airbus (PA:AIR) planes and 25% duties on French wine, Scotch and Irish whiskies and cheese from across the continent as punishment for illegal EU aircraft subsidies.

The announcement came after the World Trade Organization gave Washington a green light to impose tariffs on $7.5 billion worth of EU goods annually in the long-running case, a move that could ignite a tit-for-tat transatlantic trade war.

The U.S. Trade Representative's target list for EU tariffs, set to take effect on Oct. 18, includes large Airbus planes made in France, Britain, Germany and Spain for 10% tariffs.

But no tariffs will be imposed on EU-made aircraft parts used in Airbus' Alabama assembly operations nor those used by rival U.S. planemaker Boeing Co (N:BA), safeguarding U.S. manufacturing jobs.

Instead, the list heavily targets the four Airbus consortium countries with tariffs, including French wine, Spanish olives, British whisky, sweaters and woolens and German tools and coffee.

Cheese from nearly every EU country will be hit with the 25% tariffs, but Italian wine and olive oil was spared, along with European chocolate.

"Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies," U.S. Trade Representative Robert Lighthizer said in a statement.

"We expect to enter into negotiations with the European Union aimed at resolving this issue in a way that will benefit American workers," Lighthizer added.

WTO arbitrators said Boeing had lost the equivalent to $7.5 billion a year in sales and disruption to deliveries of some of its largest aircraft because of cheap European government loans to Airbus.

The decision, confirming a figure reported by Reuters last week, allows Washington to target the same value of EU goods, but bars any retaliation against European financial services.

It is part of a two-way dispute that diplomats and trade experts expect to lead to tit-for-tat European import tariffs against U.S. goods next year over state subsidies for Boeing.

The Trump administration asked the WTO for an emergency meeting to give the formal ratification needed for tariffs in mid-October.

Earlier this year, U.S. trade officials floated a $25 billion list of European targets from planes to helicopters, wine, cheese, spirits and luxury goods. Goods from EU countries that are not part of the Airbus consortium, such as Italy would still be targeted, a USTR official said, because European Union nations all bear responsibility for the situation.

Broad selling amid worries over slowing global growth that had punished European stocks earlier on Wednesday accelerated as the ruling revived worries about damage to the already-ailing regional economy. The pan European STOXX 600 index (STOXX) finished down 2.7%, its worst day since December 2018.

Airbus shares closed down 2%.

Wall Street's main indexes suffered their sharpest one-day declines in nearly six weeks on Wednesday after employment and manufacturing data suggested that the U.S.-China trade war is taking an increasing toll on the U.S. economy.

WAR OF ATTRITION

The world's two largest planemakers have waged a war of attrition over subsidies at the WTO since 2004 in a dispute that has tested the trade policeman's influence and is expected to set the tone for competition from would-be rivals from China.

The WTO had already found that both Europe's Airbus and its U.S. rival Boeing received billions of dollars of illegal subsidies in the world's largest corporate trade dispute.

The global trade body is due to decide early next year on the level of annual tariffs the EU can impose on U.S. imports.

German Chancellor Angela Merkel said the decision would weigh on the European planemaker, which is one of Germany's largest industrial employers and is headquartered in France.

Before any tariffs can be imposed, the WTO's Dispute Settlement Body must formally adopt the arbiters' report in a process expected to take between 10 days and four weeks.

Its next scheduled meeting is on Oct. 28, but Washington's request could bring that forward to Oct. 14.

'LOSE-LOSE' TRADE WAR

While the level of tariffs amounts to less than three days' worth of trade between Europe and the United States, importers led by U.S. airlines that buy Airbus jets have urged Washington to be selective when choosing industries to hit in order to avoid causing collateral damage to the U.S. economy.

EU manufacturers are already facing U.S. tariffs on steel and aluminum and a threat from U.S. President Donald Trump to penalize EU cars and car parts. The EU has in turn retaliated.

The Trump administration believes tariffs were effective in bringing China to the negotiating table over trade, and in convincing Japan to open its agricultural market to U.S. products.

Airbus has said this would lead to a "lose-lose" trade war and has published a video stressing its contribution to the U.S. industry through local assembly plants and 4,000 direct jobs.

Not all analysts see the WTO's aircraft subsidy row - with its thousands of pages of legal and aeronautical jargon - inflaming broader international trade tensions.

"In some ways it is a distinct issue from the rest of the Trump trade wars," said Constantine Fraser of UK research firm TS Lombard.

"I think the White House is going to be aggressive in pursuing this, but I don't think there is necessarily any kind of read-through from this to the prospect of tariffs on cars."

(For a graphic on U.S.-EU trade - https://graphics.reuters.com/WTO-AIRCRAFT/0100B2DZ1K5/WTO-AIRCRAFT.jpg)

U.S. widens trade war with tariffs on Airbus planes, French cheese, Scotch whisky
 

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Comments (7)
Buzzy Jefferson
Buzzy Jefferson Oct 04, 2019 5:10PM ET
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Europe has known for decades they have been screwing the US with unfair tariffs and refusing to pay their fair share for defense. If they were smart, they would have sought fairness and mutual respect with the US long ago, but they were too greedy and selfish. Now that the US has had enough of their abuse and disrespect, they're crying like fat kids without cake. It's embarrassing, but sooo predictably European. No violins here.
Michael Angelo
Michael Angelo Oct 02, 2019 9:21PM ET
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All these "fair trade" wars look so nice but feel so sad and depressing. Don't cry later when the recession mount and we need a Democrat to lose down the "fair trade" walls. Like it or not is an d story repeating again.
Buzzy Jefferson
Buzzy Jefferson Oct 02, 2019 8:16PM ET
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As much as we love Europe, it really is time they stop screwing the US. We have been their protectors and cookie jar since the war. We are fully down with fair trade and reciprocal tariff schedules, but Americans really are finished babysitting our socialist friends over there. Time to earn the right to run with the big dogs. It won't be easy, but you they genetically capable. Time to get to work, take fewer holidays, and earn your keep. We're rooting for you Europe!
Ludovic Raymond
Ludovic Raymond Oct 02, 2019 8:16PM ET
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You seem to know a lot aboht Europe and history! Or i should say have a lot of preconceived images
Chris Sundo
Chris Sundo Oct 02, 2019 7:38PM ET
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It seems the time and money necessary (to manage matters that were stirred up / unsettled by Trump) have to be unlimited. All this waste of time to mop up after Mr. Trump has rattled existing systems so that Mr. Trump can feel that people have acknowledged him for the small ego he has. --- Deep down he has a very small self-confidence which he needs to puff up to feel big to himself. --- And all the loose administrative ends this creates for America and the world. --- We will be witness, and we will bl'ow off some air in relief and roll our eyes after he has cleared the stage once he is gone. === Patience until then ..
Chris Sundo
Chris Sundo Oct 02, 2019 7:26PM ET
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RIDICULOUS. IT'S JUST A TEMPORARY MEASURE until the illegal support of Boeing can be addressed. Unbelievable. Wherever Trump walks there is 'Unfrieden'/lack of peace. Trump is an unhappiness maker. So sad. --- "The world's two largest plane makers have waged a war of attrition over subsidies at the WTO since 2004 in a dispute that has tested the trade policeman's influence and is expected to set the tone for competition from would-be rivals from China." === "'LOSE-LOSE' TRADE WAR:  --- . . While the level of tariffs amounts to LESS THAN 3 DAYS' WORTH OF TRADE between Europe and the United States, importers led by U.S. airlines that buy Airbus jets have urged Washington to be selective when choosing industries to hit in order to avoid causing collateral damage to the U.S. economy.. . EU manufacturers are already facing U.S. tariffs on steel and aluminum and a threat from U.S. President Donald Trump to penalize EU cars and car parts. The EU has in turn retaliated." - WASTE OF TIME TRUMP! AWAKEN!
peeter hoch
peeter hoch Oct 02, 2019 7:00PM ET
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European countries should buy european fighter jets instead of US F16 or similar....
Buzzy Jefferson
Buzzy Jefferson Oct 02, 2019 6:57AM ET
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US airlines buying Airbus planes aren't going to get much sympathy from real Americans. It's time to put country first. Overpaid CEOs can shut up and toe the line.
Josiah Moody
Josiah Moody Oct 02, 2019 6:57AM ET
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tow
Buzzy Jefferson
Buzzy Jefferson Oct 02, 2019 6:57AM ET
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Josiah Moody  Wrong. Earliest use of the phrase was in "The Diverting History of John Bull and Brother Jonathan"  in 1813.
 
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