EU-US trade war escalates over disputed aviation subsidies

Bloomberg

The European Union is preparing retaliatory tariffs against the US over subsidies to Boeing Co, significantly escalating transatlantic trade tensions hours after Washington vowed to hit the EU with duties over its support for Airbus SE.
The two sets of planned punitive measures are the latest twists in a 14-year-old dispute that the US and EU have fought at the World Trade Organization, with each side accusing the other of illegally subsidising their main aircraft makers. President Donald Trump’s administration said it would impose tariffs on $11 billion in imports from the EU because of the European aid.
The Office of the US Trade Representative said that EU support for Airbus had caused “adverse effects” when announcing the new measures, which would target European goods including jetliners, cheese and motorcycles.
The EU called the $11 billion sum cited by the USTR “greatly exaggerated” and said preparations were underway to hit back. While the EU hasn’t disclosed the amount of American goods it would target, Airbus said the bloc would proceed with “far larger countermeasures against the US.”
The heightened tensions come as the 28-nation EU works towards approving a mandate for the European Commission, the bloc’s executive arm, to negotiate cuts in industrial tariffs with the Trump administration.
The new threats may complicate those efforts, which are part of European efforts to ward off American threats of separate duties on foreign autos and
car parts.
The threatened American tariffs, which come after the WTO ruled in May that Airbus had received illegal funding for its A380 and A350 models, costing Boeing sales, would be implemented only after the WTO gave the final go-ahead this summer, the administration said, marking a rare show of faith in an institution that Trump himself has assailed.
Airbus said in a statement that the US tariff threat was
“totally unjustified” and that it had taken “all necessary measures” to comply with the WTO ruling regarding illegal aid.
The proposed measures are relatively minor compared with the US’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. But they mark a significant escalation in tensions with the EU, which has implemented retaliatory duties on $3.2 billion of US imports following Trump’s trade restrictions on foreign steel and aluminum.
Some EU members, led by France, are already skeptical of the value of negotiations with the US, which were agreed to last July in a bid by the EU to avoid auto tariffs Trump has threatened.
Furthermore, a draft of the mandate seen by Bloomberg specifically gives the EU an opt-out if the US were to impose new tariffs on the bloc.
“It’s in the interests of the US and the EU to find a friendly accord on the issue of penalties in the airplane sector,” French Finance Minister Bruno Le Maire told reporters in Paris. “When I see slowing world growth, I don’t think that we can afford a trade war, even if it’s just in one industrial sector.”
The proposed tariffs come nearly 15 years after the US first complained to the WTO that Airbus had widely benefited from billions of dollars in illegal subsidies.