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U.S. to Put Tariffs on Europe Planes, Whiskey After WTO Ruling

Bryce Baschuk

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The price of Scotch, French wine, cheese and other European exports is about to go up in the U.S. after the Trump administration announced new tariffs on billions of dollars of EU products starting Oct. 18.

President Donald Trump got the go-ahead from the World Trade Organization on Wednesday to impose tariffs on as much as $7.5 billion worth of European exports annually in retaliation for illegal government aid to Airbus. The award is the largest in WTO history.

The U.S. plans to impose a 10% tariff on large civil aircraft from France, Germany, Spain and the U.K. It will also slap 25% levies on a range of other items including Irish and Scotch whiskies; wine, olives and cheese; as well as certain pork products, butter and yogurt from various European nations, according to the U.S. Trade Representative’s Office.

The U.S. removed leather goods from its original proposed list -- among other items -- sparing luxury labels such as Givenchy and Louis Vuitton. Wine and spirits produced by LVMH, Remy Cointreau SA, Pernod Ricard SA and Diageo PLC are among those affected by the levies.

The new U.S. list does spare some Airbus parts including sections of fuselage that are used to assemble A320s for American buyers at a plant in Mobile, Alabama. State officials in Alabama had lobbied for parts used by the plant to be spared.

Settlement Talks

Washington has requested the WTO meet Oct. 14 to formally authorize the tariffs, and the duties would then take effect Oct. 18, according to USTR. The goal of the Trump administration in imposing retaliatory duties is to persuade the European Union to reach a negotiated settlement, according to a senior U.S. trade official who briefed reporters on Wednesday.

“Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies,” U.S. Trade Representative Robert Lighthizer said in a statement. “We expect to enter into negotiations with the European Union aimed at resolving this issue in a way that will benefit American workers.”

The ruling Wednesday is a milestone in the WTO’s longest-running dispute that will further test transatlantic relations, which have deteriorated under Trump’s “America First” approach to international ties. It’s also an example of Trump getting a favorable ruling from an organization he has threatened to pull out of.

The U.S. is already in a trade war with China, and any wider flareup of tit-for-tat tariffs with Europe could threaten a fragile global economy. The WTO on Tuesday cut its trade growth forecast for this year to the weakest level in a decade, warning against a “destructive cycle of recrimination.”

The Trump administration had been considering a particularly damaging trade weapon known as “carousel” retaliation, which would enable the U.S. to regularly shift around the targeted goods, people familiar with the deliberations said last month. That would increase trade uncertainty and pain for European businesses.

A senior USTR official who briefed reporters Wednesday said that the Trump administration has the authority to periodically revise the retaliatory targets and tariff rates.

Inflict Damage

The EU will retaliate against against any Airbus-linked tariffs when the WTO rules early next year on the bloc’s dispute over U.S. subsidies to Boeing, according to European Trade Commissioner Cecilia Malmstrom.

“The mutual imposition of countermeasures, however, would only inflict damage on businesses and citizens on both sides of the Atlantic, and harm global trade and the broader aviation industry at a sensitive time,” Malmstrom said, adding that the bloc is ready to work with the U.S. on a “fair and balanced solution for our respective aircraft industries.”

Airbus warned in a statement that tariffs on its aircraft and components would come as a blow to the U.S. aerospace industry, with some 40% of its procurement coming from American suppliers.

The company also urged the Trump administration to take account of the forthcoming WTO decision on Boeing, saying those reciprocal tariffs could exceed the value of the U.S. sanctions. Chief Executive Officer Guillaume Faury repeated calls for a negotiated settlement to the dispute.

The WTO has repeatedly ruled that Toulouse, France-based Airbus unfairly benefited from launch aid loans and other trade-distorting subsidies for two Airbus models, the A380 and A350WXB.

“Europe is facing tariffs today because Airbus has refused for years to comply with WTO rulings,” Boeing said in an email. “Unfortunately, Airbus’s non-compliance will negatively impact European Member States, industries, and businesses completely unrelated to Airbus’s actions, as well as Airbus’s airline customers.”

For its part, Airbus noted that in a few months, “the WTO will give the EU its own basis on which to seek countermeasures against the US. The amount of the EU’s countermeasures may equal or exceed the countermeasures authorized by the WTO to the U.S.,” company spokesman Clay McConnell said in a email statement.

Political Error

The Trump administration wants to see an end to the EU subsidies in question, which Boeing and the U.S. claim give Airbus an unfair advantage in the highly competitive international passenger aircraft market.

French Finance Minister Bruno Le Maire says the best solution would be one that lowers tensions, but warned the EU would respond “firmly” if the U.S. imposes tariffs.

“If the U.S. chooses to impose sanctions, it would be an economic and political error,” he said.

(Updates with comment from Lighthizer in sixth paragraph.)

--With assistance from Christopher Jasper, Zoe Schneeweiss, Fergal O'Brien, Jonathan Stearns, Kasia Klimasinska, Blaise Robinson, Jenny Leonard and Shawn Donnan.

To contact the reporter on this story: Bryce Baschuk in Geneva at bbaschuk2@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Sarah McGregor, Robert Jameson

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