The U.S. Trade Representative's office announced an increase in countermeasure penalties on aircraft and parts imported from the European Union, to 15% from 10%, and scheduled to go into effect on March 18. The agency also revised (but did not increase) the 25% tariffs imposed on cheese, wine, and other products from the E.U.
All these tariffs stem from an October 2 ruling by a World Trade Organization appellate panel authorizing the U.S. to take countermeasures valued at $7.5 billion on products imported from the E.U., France, Germany, Spain, and the U.K., in connection to a long standing case concerning illegal subsidies to Airbus S.A. The U.S. had sought penalties of $11 billion.
Airbus jets affected by the penalties would be the A320, A330, and A350 series assembled in Toulouse, France; the A318, A319, A320, and A321 series assembled in Hamburg, Germany; and the A400M turboprop military transport aircraft assembled in Seville, Spain.
Airbus also assembles A319 and A320 series jets in Tianjin, China.
Notably, the A220, A319, A320, and A321 jets assembled in Mobile, Ala., as well as A220 jets assembled at Mirabel, Québec, would be unaffected by the tariffs.
Airbus issued a statement to say it "deeply regrets USTR’s decision," which it added "further escalates trade tensions between the U.S. and the EU, thereby creating more instability for U.S. airlines that are already suffering from a shortage of aircraft."
Airbus also noted that various U.S. airlines have objected to the tariffs, because they maintain that the increased cost for aircraft will be paid by airline passengers.
The USTR decision may be part of a strategy to force a negotiated settlement with the EU on the issue of aircraft subsidies: Another WTO appellate ruling is expected in May or June, in a case brought by the EU versus the U.S., alleging subsidies to Boeing Co. The EU has drawn a list of products worth $20 billion that it could hit with tariffs should the WTO rule in its favor in the parallel case.
In addition, the Trump Administration is seeking to restructure U.S.-EU trade terms. The European Union has signaled its willingness to negotiate trade with the U.S., but claims it will not be coerced into an unfavorable trade deal.
Airbus stated it "has and will continue to push for a negotiated settlement" to the long trade dispute to this 15-year-long dispute. USTR’s further escalation complicates efforts to find a negotiated outcome to this dispute.