Trump imposes EU tariffs after WTO ruling
After a World Trade Organization ruling, the Trump administration announced it would impose tariffs on imports from Germany, France, Britain, Spain, and Italy. Officials in Washington are providing the European states until Oct. 18 before the tariffs kick in, a punishment for a 15-year legal battle between Boeing and Airbus. Under President Donald Trump, the United States has often turned to tariffs as a mechanism for negotiating leverage and retaliation. Mexico, Canada, India, and of course China have all been on the receiving end of adverse economic policies from Washington.
The US, home of Boeing aircraft manufacturing, had argued for years that European nations provide illegal subsidies to Airbus, Boeing’s largest competitor. Critical to the case was evidence that Airbus had benefited from loans well below market-rate. Furthermore, these loans have often been forgiven. The major financial boost spurred Airbus’ tremendous growth as it rose from 25-percent market share in 1990 to being the industry leader today.
On Oct. 2, the WTO handed down a victory for Trump and Boeing, going so far as to permit Washington to impose punitive tariffs. According to a New York Times report, it was an eventuality Boeing CEO Dennis Muilenberg had prepared for by prepping Trump. The American president toured a Boeing plant shortly after assuming office. After holding a rally, the president was pulled aside by Muilenberg who pitched his side of the Boeing versus Airbus argument. Several people privy to the discussion stated that the Boeing executive lobbied Trump to hit back against Europe, if the ruling came out favorable for the US.
Directly following the WTO verdict, Trump announced $7.5 billion worth of tariffs on European nations. Aircraft assembled in France and Germany will suffer 10-percent tariffs, German-produced machinery and some food products will be taxed 25 percent, cheese from Italy and France in addition to olive oil and wine from Spain will all receive 25-percent tariffs as well. Furthermore, British textiles and single malt whisky from Scotland on top of a wide swath of additional food categories from every European nation will also be levied with 25-percent tariffs.
Although the tariffs are a result of a case involving two aviation giants, aircraft manufacturing is neither the only nor the hardest-hit industry by Trump’s latest tariffs.
“All of those countries were ripping off the United States for many years,” Trump declared. “They know I’m wise to it. We’ve had a lot of wins. This was a $7 billion win. Not bad.”
It was a historic ruling for the WTO when considering the amount of damages awarded. It also gave Trump justification for tariffs, justification that came from an international organization he can point to as a reason for his trade manoeuvre. Previous tariffs appeared to come randomly, as if Trump were choosing nations and products by throwing darts at a wall. The WTO’s ruling is significantly more meaningful than the president’s previous whimsies.
“Europe is facing tariffs today because Airbus has refused for years to comply with W.T.O. rulings,” Boeing said in a statement. “Unfortunately, Airbus’s noncompliance will negatively impact European member states, industries and businesses completely unrelated to Airbus’s actions, as well as Airbus’s airline customers.”
While Boeing is under the impression that the tariffs will hurt its competition, some US airlines do not agree. Delta labelled them “an unfair tax on US consumers and companies,” and JetBlue said they would “harm customers.” US airlines would rather continue buying Airbus planes and pass the tax down to their customers before switching orders to Boeing. That might even be justified considering the tragic fate of the Boeing 737-MAX, which was recently delayed yet again, this time until January 2020. It has been a terrible year for Boeing and although the WTO ruling is positive news, it may not be enough to turn the tide in its favor.
Fresh tariffs against the European Union will spur economic countermeasures, which are already being discussed. Bruno Le Maire, France’s finance minister, said that his government “will be ready to respond firmly with our European partners.” On Thursday, he reiterated his view that a resolution between Boeing and Airbus would be the only way to avoid European tariffs.
The WTO’s verdict may have been justified with its conclusion that Airbus illegally benefited from favorable deals in European nations. The Trump administration might have been too eager to lash out with more tariffs, however, without considering the ripple effect it will have on the US aviation and food industries. American consumers will pay the price, whether it is the cost of wine going up or the increased price of a plane ticket. With the latest round of tariffs against European nations, it seems as if there is no country the Trump administration has not levied tariffs against.