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EU - US Trade War

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  • Competition, EU and Trade
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On 2 October 2019, the World Trade Organisation (“WTO”) ruled that the U.S. that the tariffs on $7.5 billion worth of goods imported from the EU imposed by the U.S. in response to the EU’s unlawful subsidies to Airbus were authorised.


The US first filed a complaint with the WTO in 2004 where it argued that the EU was providing illegal subsidies to Airbus via cheap loans. The WTO agreed with the U.S., finding that every plane ever brought to market by Airbus was illegally subsidised, and ordered the EU to amend its practices so that any loans that were extended to Airbus were on commercial terms. The EU filed a counterclaim alleging that the U.S. was engaging in similar practices with Boeing. The imposition of WTO-approved tariffs are one of the remedies available to WTO members in order to rectify an imbalance in trade. Originally the U.S. had proposed tariffs on $11 billion worth of goods. However, the WTO cut this to $7.5 billion – which are still the largest countermeasures of their kind in WTO history.

What does this mean in practice?

From today (18 October 2019) tariffs will be applied on a wide range of goods imported into the U.S. from the EU. U.S. trade officials have said that the tariffs are to be set at 10% for aircrafts and 25% on agricultural and other items. A list of all items affected by the tariffs has been published by U.S. authorities. The goods affected span the goods of various industries, including alcohol, clothes and tools and machinery.

In an unprecedented turn of events, the tariffs will not apply to all EU-origin goods. Instead, the list of goods specifies the individual EU Member State from which the targeted goods originate (e.g. 25% on single-malt (or straight) Irish and Scotch Whiskies, 25% on German-origin base metal tweezers and 25% on German or UK-origin waffles and wafers). It appears that goods from the UK, Germany, France and Spain will be most adversely affected.

The European Commission has threatened to retaliate in kind by imposing further tariffs on U.S. goods. However, no proposals have thus far been submitted to this effect.

The case is still not over. The WTO continues to deliberate the EU’s countermeasure proposal to impose tariffs on $20 billion worth of goods imported from the U.S. to the EU in retaliation for the U.S. state aid given to Boeing. It has been suggested that this ruling will not be determined until next year. In the meantime, the European Commission has stated that it hopes to reach a settlement and end this ‘trade war’. Numerous businesses have publicly supported an amicable resolution stating that “tit-for-tat tariff war” would cause serious damage on both sides.