President Trump took to Twitter early this morning, where he claimed that the United States plans to place tariffs on $11 billion dollars’ worth of products from the European Union, as a way to offset the subsidies Europe has given to Airbus.
The current conflict is one that has actually been ongoing for nearly 15 years, and it surrounds the battle between two of the world’s top aviation giants—Boeing and Airbus. With Boeing based in the United States, and Airbus based in Europe, it has led to the US and the EU exchanging accusations that the other party is illegally subsidizing their main aircraft maker.
The U.S. Trade Representative’s Office announced on Monday that it has started the process of placing tariffs on the EU under Section 301 of the Trade Act of 1974—which will be applied until the EU removes its subsidies on Airbus.
The proposed tariffs would be placed on more than$11 billion dollars’ worth of products from Europe, including civilian aircrafts and agricultural products such as cheese and olive oil. But while this could lead to higher prices and a shake-up on trade between the US and the EU, there is also concern that the Trump Administration could be isolating some of its closest allies.
Trump addressed the conflict on Twitter, and pointed to the World Trade Organization’s ruling that Europe’s subsidies for Airbus have adversely impacted the US. He also argued that the EU has taken advantage of the US on trade for many years.
The current battle between the US and the EU stems from 2004 when Washington accused Britain, France, Germany and Spain of providing illegal subsidies and grants to support the production of Airbus products. Then in 2005, the European Union filed a complaint alleging that Boeing was receiving billions of dollars in subsidies from the United States government.
Since then, the WTO has ruled that certain subsidies on each side were illegal, while allowing others. After multiple appeals were submitted, a World Trade Organization appeals body ruled in 2017 that a number of subsidies from Washington state to Boeing were legal in a decision that was not subject to appeal.
In a statement, the European Commission said it has started plans for prompt retaliation against the US—but it remains open for discussion on the case.
While the possibility of increased trade tensions between the US and the EU increases, trade talks between the US and China have also continued. But Top US officials said that they are not satisfied yet, and there are still issues standing in the way of a deal to end the US-China trade war—but there was progress made in talks with China last week.
So, as a deal with China remains a possibility, there are concerns that by placing 11 billion dollars in tariffs on the EU, the United States could be sending itself into yet another trade war.