Donald Trump vows to put tariffs on $11 billion of European Union products

Erika Holt
April 10, 2019

The World Trade Organization ruled a year ago that the European Union provided illegal subsidies to plane maker Airbus. "When the European Union ends these harmful subsidies, the additional USA duties imposed in response can be lifted".

The list is subject to public comment in anticipation of an expected World Trade Organisation (WTO) ruling this summer that would be favourable to the U.S. in a pending arbitration case.

US Trade Representative Robert Lighthizer said: "This case [about Airbus] has been in litigation for 14 years, and the time has come for action".

'The EU is confident that the level of countermeasures on which the notice is based is greatly exaggerated, ' a European Commission source said.

Boeing released a statement backing the Trump administration's hardline stance. It has already brought a case on the issue to the WTO. "You're creating chaos in the market". Mr Trump said on Twitter. Some auto manufacturers, including Toyota's Jim Lentz, have warned that it could reconsider up to $750 million in US investments in five Southern states if the tariff talks aren't resolved.

"When the European Union ends these harmful subsidies, the additional US duties imposed in response can be lifted", US Trade Representative Lighthizer said in the statement. The US government filed a similar claim that year over European subsidies to Airbus.

"It will soon stop!" he wrote.

In Germany, the euro area's biggest economy and top exporter, manufacturing is shrinking the most in more than six years, Italy has sunk into recession and countries are also bracing for fallout from Brexit.

The tariff threat issued by the United States on Tuesday risks further escalation.

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The yen rose as traders favored the safe-haven currency in the wake of the United States proposal for tariffs on European goods.

"Business investment is now being put on hold because of the uncertainty around tariffs", he said.

The proposed measures are relatively minor compared with the U.S.'s ongoing trade war with China, in which the two sides have imposed tariffs on about $360 billion of each other's goods in the past nine months.

At a White House meeting in January, German automakers, including Volkswagen, BMW, and Daimler, said they planned to invest more in the United States, dependent on whether the Trump administration imposes tariffs on them or not.

Mr Trump, a critic of the WTO, tweeted that he "will now put Tariffs on $11 Billion of European Union products! The administration is preparing to respond immediately when the WTO issues its finding on the value of USA countermeasures". A measure of euro-area economic confidence is already at the lowest since 2016, having fallen nearly non-stop for more than a year. It excluded aircraft sold to the US military.

Whether the US gets the legal right to implement the new tariffs will depend on a ruling by the WTO, an organization based in Geneva that sets the rules for global commerce and settles disputes.

Washington's row with Brussels over subsidies to Airbus, a long-time competitor to U.S. aerospace giant Boeing, dates back to 2004, when the United States first appealed to the World Trade Organisation for arbitration. The EU, however, has also accused the US of illegally subsidizing Boeing - the main rival of Airbus.

The action comes as USA aerospace giant Boeing grapples with the fallout from two deadly crashes involving its 737 Max planes, which have been grounded globally.

Tariffs on European airplanes could in theory help Boeing and hurt Airbus, whose shares were down 1.7% on Tuesday on a day when stock markets were mostly higher.

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