• by Thom Forbes  @tforbes, April 9, 2019

In a move that escalates trade tensions between the Unites States and the European Union, the Trump administration is threatening to impose tariffs on about $11 billion worth of goods in retaliation for the subsidies the EU grants to Airbus, which is based in Leiden, Netherlands. The World Trade Organization has ruled that the subsidies have an adverse impact on the U.S.

“Trump’s U.S. trade representative, Robert Lighthizer, announced a list of goods which could be hit by tariffs late on Monday night. … The 14-page list has some fairly symbolic targets, with ‘French cheese,’ Roquefort cheese, wine, champagne, olive oil and seafood such as oysters,” Jasper Jolly reports for The Guardian.

Some of the other goods being considered, according to the BBC, are salmon fillets, fresh or chilled; lemons, fresh or dried; cashmere sweaters; ceramic household steins with pewter lids; motorcycles with an engine size of between 500cc and 700cc; non-electric wall clocks designed to operate over 47 hours without rewinding; and helicopters produced in France, Germany, Spain or the U.K.

“Some of the categories may appear puzzling: for instance, oysters are targeted if they are ‘prepared or preserved, but not smoked.’ Telescopic sights for rifles are included, but not those ‘designed for use with infrared light.’ ‘Earthenware ornamental articles’ are on the list, if they have ‘a reddish-colored body and a lustrous glaze of differing colors,” Alasdair Sandford observes for Euronews.

The EU and the U.S. “have been battling for more than a decade over mutual claims of illegal aid to plane giants Boeing and Airbus, with parallel cases at the WTO. Both sides have been caught paying billions of dollars of subsidies to gain advantage in the global jet business,” writes Chris Prentice for Reuters. 

“This case has been in litigation for 14 years, and the time has come for action. The Administration is preparing to respond immediately when the WTO issues its finding on the value of U.S. countermeasures,” Lighthizer says in a statement. “Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft. When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted.” 

Bernd Lange, chairman of European Parliament Committee on International Trade, tells Bloomberg TV this morning that he is “really skeptical about negotiating under pressure. … We are partners, not competitors.”

“The announcement by the US to impose tariffs against the EU is a clear sign of provocation. The EU has done all efforts needed to comply with the ruling against Airbus. These 11 billion $ tariffs on key products, such as cheese and wine, will only worsen the climate,” Lange tweets.

Indeed, “the move represents a significant escalation between Washington and Brussels at a time when officials on both sides of the Atlantic have become increasingly frustrated with one another,” James Politi and Jim Brunsden write for Financial Times.

“A European Commission official said that the $11 billion figure ‘is based on U.S. internal estimates that have not been awarded by the WTO’ and is ‘greatly exaggerated.’ ‘The amount of WTO-authorized retaliation can only be determined by the WTO-appointed arbitrator,’ the official said,” Politi and Brunsden add.

Complicating matters, “the EU won a round in March in its WTO counter-case against U.S. subsidies provided to Boeing Co., Airbus’s chief competitor. That ruling puts the EU on track to compose a similar list of tariffs against U.S. goods and services in several months’ time. The EU is starting to prepare its own list of tariffs, an official for the European  Commission official said,” writes Joshua Zumbrun for the Wall Street Journal.

Then again, “the latest tariffs could be a precursor to U.S. plans to also target Europe's embattled car industry. The Trump administration is mulling tariffs on EU cars after commerce secretary Wilbur Ross submitted a report in February on whether they pose a threat to national security, giving the U.S. president 90 days to decide whether to press ahead,” Tom Rees and Charlie Taylor-Kroll point out for the Telegraph.

The auto industry warned at the time “that feared tariffs of up to 25% on millions of imported cars and parts would add thousands of dollars to vehicle costs and potentially lead to hundreds of thousands of job losses throughout the U.S. economy,” Reuters’ David Lawder and David Shepardson report.

“These tariffs, if applied, could move the development and implementation of new automotive technologies offshore, leaving America behind,” the Motor and Equipment Manufacturers Association, which represents auto parts suppliers, said in a statement they cite. “Not a single company in the domestic auto industry requested this investigation.”

In that vein, we wonder if anyone in the domestic earthenware ornamental articles industry has requested tariffs on its competitors across the pond.