The Trump administration escalated its dispute with the EU over aircraft subsidies after announcing that it would raise tariffs on plane imports from 10-15 per cent.The office of the US trade representative made the announcement late on Friday, in a move that will irk Brussels and hurt Airbus, the pan-European aircraft maker.However, the US decided against raising the 25 per cent levies it has also put in place on a wide range of European and British goods — from food to tools and apparel — in retaliation for subsidies given to Airbus. The decision not to proceed with higher tariffs on the broader set of goods will be greeted with relief in Brussels and EU capitals, containing the damage to the transatlantic relationship as officials on both sides of the ocean try to negotiate a more meaningful trade pact.Limited changes were made to the list of products affected by the US tariffs. Prune juice was removed from the list of affected items, while kitchen chopping knives from France and Germany were added.
Producers of goods still affected by the tariffs immediately expressed disappointment at not having ben removed from the list. The Distilled Spirits Council of the US warned that retaliatory tariffs placed on American whiskey by the EU was hurting the European sales of US drinks companies. The US has already hit single malt Scotch whisky, along with assorted liqueurs from Europe, with tariffs.After reaching a limited truce deal in the long-running US trade conflict with China, and sealing congressional approval of a pact to revise Nafta with Canada and Mexico, Mr Trump has turned the focus of his aggressive trade policies increasingly towards Europe.US officials have frequently lamented America’s goods trade deficit with the EU, which has risen from $146bn in 2016 to $178bn in 2019, according to data from the US Census Bureau.In addition, they have protested against moves by several European countries to impose a digital services tax that would hit some of the largest US technology groups, and have been irritated by the EU’s resistance to big concessions on agricultural market access, which is consistently one of Mr Trump’s top goals.In Brussels and across the EU officials have been angered that Washington moved to impose national security-based tariffs on their steel and aluminium products in 2018, and have been constantly on edge over Mr Trump’s threats to impose similar levies on European automotive imports, including cars and car parts.They have watched with growing concern as Washington has taken steps to disrupt the functioning of the World Trade Organization, chiefly by refusing to allow the nomination of new judges to the appellate body of the dispute settlement mechanism.The Airbus-related tariffs were always considered as a more digestible move by the US against the EU, since they were authorised by the WTO after a dispute that has lasted a decade and a half. Trade Secrets
Trade Secrets is the FT’s must-read daily briefing on the changing face of international trade and globalisation. Sign up here to understand which countries, companies and technologies are shaping the new global economy However, they have threatened to further erode trust in transatlantic relations, just as Mr Trump and Ursula von der Leyen, the European Commission president, vowed to push for their own limited truce on trade that could ease tensions in areas ranging from industrial goods, to technology and energy.Since the Airbus related tariffs were imposed, EU producers of the targeted goods, along with the US importers who are purchasing the products and paying the levies, mounted a strong lobbying campaign to persuade the Trump administration to drop the levies and reach a negotiated settlement with the EU instead. However, the chances of an agreement are slim. Later this year the WTO is expected to decide the scope of possible EU retaliation against the US in a separate but similar long-running dispute over American subsidies to Boeing, and neither Washington nor Brussels are expected to make any big concessions until then.