Tariffs on $7.5B of EU goods take effect

UPDATE: Oct. 18, 2019: The Trump administration confirmed tariffs on $7.5 billion of EU goods went into effect Friday. The move has added to concerns about the impact of trade wars on American importers and the global economy at large.

Dive Brief:

The U.S. will levy tariffs on $7.5 billion worth of EU goods according to an announcement from the U.S. Trade Representative (USTR) hours after the World Trade Organization (WTO) issued a decision authorizing the U.S. to levy tariffs of up to 100% on the goods. New tariff rates will be limited to 10% on large civil aircraft and 25% on agricultural and other products, according to USTR, beginning on or near Oct. 18.
The conflict at the heart of today's WTO decision has been ongoing since 2005, when the U.S. first made its case to the WTO claiming low interest rates granted to Airbus were tantamount to subsidies for the aircraft maker. According to the WTO's ruling today, those actions are seen as damaging to U.S. interests in the eyes of the WTO and it is, therefore, the United States' right to levy tariffs in response.
Items subject to duties include aircraft parts, luxury apparel, cheese, seafood and steel, among others. The bulk of the tariffs will be levied on imports from France, Germany, Spain and the United Kingdom — "the four countries responsible for the illegal subsidies" according to USTR.

Dive Insight:

The new tariffs may escalate trade tensions with some of the United States' closest allies and largest trading partners, but they are not as expansive as the U.S. originally hoped. The U.S. petitioned the WTO in April to approve tariffs on $11 billion in EU goods — which the U.S. claimed was equivalent to the harm EU subsidies to Airbus has caused.

The EU is engaged in a parallel WTO case against Boeing, citing U.S. support for the airline manufacturer as disadvantaging European firms in a similar manner. However, the USTR disputes this claiming total U.S. government aid to Boeing is far less significant than EU aid to Airbus. As the EU complaint was filed nine months after the U.S. complaint it will be addressed at a later date.

The European Commission released a statement today saying that despite the U.S. levying tariffs, "opting for applying countermeasures now would be short-sighted and counterproductive." To avoid this, the commission says it, "shared concrete proposals with the U.S. for a new regime on aircraft subsidies, and a way forward on existing compliance obligations on both sides. So far the U.S. has not reacted."

The new tariffs resulting from the Airbus case aren't the only ones the U.S. is reportedly considering. Currently, the Trump administration has until Nov. 13 to decide whether it will implement 5% to 10% tariffs on EU vehicles as well.