The World Trade Organisation has said the US can impose tariffs on up to 7.5 billion dollars (£6.1 billion) of goods from the European Union as retaliation for illegal subsidies the bloc gave to plane-maker Airbus — a record award from the trade body.
The move clears the Trump administration to slap counter-measures on the 28-member bloc and follows a WTO ruling in May 2018 on the Airbus subsidies.
Wednesday’s award does not end the long-running transatlantic dispute over aircraft: WTO arbitrators are expected to rule next year on how much the EU can impose in tariffs following a separate decision that went against Boeing.
The US has already announced plans to impose tariffs on EU cheeses, olives and whisky, as well as aircraft and aircraft parts. Wednesday’s decision may require fine-tuning of that list.
Such tariffs can take effect no earlier than mid-October because a key WTO panel needs to formally sign off on them, but they are likely to have an impact on key agricultural and other sectors of the European economy, at a time when other tariff battles have dented global trade growth.
The EU’s leading trade official responded to the announcement by saying the bloc would prefer to reach a settlement with the US to avoid a tariff war — but it will respond if President Donald Trump imposes new duties on EU products.
Trade commissioner Cecilia Malmstrom said a tariff war “would only inflict damage on businesses and citizens on both sides of the Atlantic, and harm global trade and the broader aviation industry at a sensitive time”.
“If the US decides to impose WTO-authorised counter-measures, it will be pushing the EU into a situation where we will have no other option than to do the same,” she said.
The arbitration award is the largest among about two dozen at the WTO since it was created nearly 25 years ago.
The previous record award of 4 billion dollars was in 2002 when the WTO ruled against the US over the Foreign Sales Corporation law that allowed for illegal subsidies to some US businesses.
Unlike the Trump administration’s unilateral tariffs on billions of dollars of steel, aluminium and other goods from China, the EU and elsewhere, the retaliatory tariffs authorised in the Airbus case enjoy a stamp of approval from the WTO — an organisation Mr Trump has repeatedly criticised.
A May 2018 WTO ruling found that EU “launch aid” for Airbus had resulted in lost sales for Boeing in the twin-aisle and very-large-aircraft markets.
The ruling centred on two aircraft: the 350XWB — a rival of Boeing’s 787 — and the double-decker A380, which surpassed the Boeing 747 as the world’s largest commercial passenger plane.