The EU announced that it will impose tariffs on $4 billion worth of U.S. goods effective Tuesday, November 10, 2020, pursuant to an October 13, 2020 decision by the World Trade Organization (WTO) in its favor, authorizing the EU to impose tariffs in retaliation for illegal subsidies given by the U.S. to Boeing. Accordingly, the EU will impose a 15% tariff on all imports of Boeing aircraft from the U.S. and a 25% tariff on identified agricultural and industrial goods from the U.S., including tobacco, spirits, cereal, wheat, condiments, luggage, fitness machines, and tractors.
This new round of tariffs is a result of a long-standing WTO dispute between the U.S. and EU over aircraft subsidies by the parties to Boeing and Airbus, respectively. This most recent EU action follows the United States' imposition of tariffs of $7.5 billion on Airbus aircraft, aircraft parts, and various imported EU agricultural, food, and wine products, following a parallel WTO decision in the United States' favor in October 2019. In its complaint, the United States argued that the EU gave Airbus billions of dollars in subsidies that resulted in an unfair advantage for Airbus, allowing it to gain market share in Europe, Asia, and elsewhere at Boeing's expense. The U.S. tariffs on Airbus aircraft and select EU products have been in place since October 18, 2019.
In the European Commission press release announcing the tariffs, the EU Trade Commissioner Valdis Dombrovskis was quoted as calling upon the "U.S. to agree to both sides dropping existing countermeasures with immediate effect, so we can quickly put this behind us. Removing these tariffs is a win-win for both sides, especially with the pandemic wreaking havoc on our economies. We now have an opportunity to reboot our transatlantic cooperation and work together towards our shared goals." The U.S. is widely expected to take a more conciliatory approach toward the EU under the new Biden administration and deescalate or settle this long-standing dispute come January 2021; however, no formal statement has been issued.
United States Trade Representative (USTR) Robert E. Lighthizer has previously stated that the EU has no legal basis for imposing tariffs on U.S. goods pursuant to the WTO decision because the subsidies to Boeing, in the form of tax breaks by Washington state, were repealed earlier this year. Following the announcement, Ambassador Lighthizer stated that "The United States is disappointed by the action taken by the EU today," and that "[t]he alleged subsidy to Boeing was repealed seven months ago." It is not apparent whether USTR intends to respond with countermeasures.
We continue to monitor updates on this rapidly developing issue. If you have questions regarding how these changes may impact your business, please contact our International Trade Group.