Tariff Risk Comes Calling As US Gets WTO Green Light On $7.5 Billion In Sanctions In Plane Fight

The US can retaliate against $7.5 billion in EU goods per year, in response to illegal subsidies to Airbus, the WTO said on Wednesday.

The announcement was expected, and comes after the EU failed to convince the US to work towards a negotiated settlement.

Hopes for an amicable resolution to the long-running dispute disappeared altogether on Tuesday when the EU’s Cecilia Malmstrom told reporters in Brussels that Europe had “not received a positive response” from Washington.

Read more on the Airbus spat here and here

The new tariffs from the US could go into effect as early as this month.

The EU is expected to retaliate, eventually, once the WTO rules on a parallel dispute over Boeing subsidies.

Here is the summary of the key findings by the Arbitrator:

The subsidies at issue in this proceeding were actionable subsidies disciplined under Part III of the SCM Agreement. The Arbitrator determined that the level of countermeasures “commensurate with the degree and nature of the adverse effects determined to exist”, in the December 2011-2013 reference period (which was the same reference period used in the compliance proceedings) within the meaning of Article 7.10 of the SCM Agreement, amounts to USD 7,496.623 million per annum. Therefore, the Arbitrator concluded that the United States may request authorization from the DSB to take countermeasures with respect to the European Union and certain member States, as indicated in document WT/DS316/18, at a level not exceeding, in total, USD 7,496.623 million annually.

These countermeasures may take the form of (a) suspension of tariff concessions and related obligations under the GATT 1994, and/or (b) suspension of horizontal or sectoral commitments and obligations contained in the United States’ services schedule with regard to all services defined in the Services Sectoral Classification List, except for financial services.

This is just insult to injury on an already bad day for global markets.

French Finance Minister Bruno Le Maire isn’t amused. The EU will respond “firmly” if the US goes ahead with tariffs, he said Wednesday, following the ruling.

“An amicable solution to the Boeing/Airbus dispute is the best solution, all the more so as Europe could impose sanctions on the US next year”, Le Maire said in message to the media. “We want to bring tensions back down and avoid tariffs that will only harm both our economies at a time when China is strengthening its aeronautical industry”.

Again, this was a long (long) time coming and it’s not clear that anyone realistically expected the EU to successfully lobby the US for some kind of negotiated settlement. But the psychological effect is simply to underscore the threat posed by tariffs to a global economy that is teetering precariously on the brink of a downturn.

“If the US chooses to impose sanctions, it would be an economic and political error”, France’s Le Maire added.

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Key facts