The World Trade Organization (“WTO”) ruled on September 30th that the U.S. was free to impose $7.5 B in tariffs on European goods being imported into the U.S. The increased tariffs could begin as early as October 18th.
The ruling is the result of fifteen years of litigation related to original allegations by the U.S. that Airbus SE had received $18 billion in discounted financing and other trade-distorting subsidies between 1968 and 2006 from the European Union for two Airbus models, the A380 and A350WXB, which disadvantaged U.S. aircraft manufacturer, Boeing. Global trade rules prohibit countries from providing subsidies to companies which provide an unfair trade advantage over foreign rivals. The initial ruling agreeing with the U.S. position was handed down by the WTO in 2011. The last seven years has been spent reviewing the U.S. position that it was entitled to impose tariffs in retaliation.
The U.S. plans additional tariffs of 10 percent on European aircraft and 25 percent on a variety of agricultural and industrial products as soon as the WTO ruling is finalized. Some of the potential products mentioned for increased tariffs have been:
- Wine and spirits
- Olives, cheese, pork products, butter and yogurt
It has been speculated that the administration might also pursue “carousel” retaliations, which means that increased tariffs would be regularly shifted around to different targeted goods, thereby causing maximum damage and impact.
As in all things trade related, it does not stop there. The European Union has filed a separate complaint with the WTO alleging Boeing also received improper government backing. That complaint is due to be ruled upon by the WTO next year. The European Union has promised retaliatory tariff increases against the U.S. once tariffs are increased lasting until the WTO rules on their complaint.
In parallel to these actions, the U.S. is considering tariff increases of 25% on European automobiles. In May of this year, the Department of Commerce ruled that imported automobiles and auto parts were a threat to U.S. national security “by challenging the viability of U.S.-based research and development”. The administration is due to decide on these tariff increases in November.
So decide carefully, will it be less expensive to buy your favorite French wine and Italian cheese here or call the airlines and dine in Europe?
Export Solutions can’t assist you with booking your flight to Europe, but we can assist you by offering a free consultation to determine how these upcoming changes may affect your business.
Jim McShane is a Sr. Consultant, Trade Compliance for Export Solutions -- a full-service consulting firm specializing in ITAR and EAR regulations.