Trump effect:
Situation will get worse if EU seeks to retaliate on US tariffs
A file picture of an Airbus A320neo passenger plane leaving its hangar at the Airbus plant in Saint-martin-du-touch, near Toulouse, southern France. Airbus trade feud spurs new Trump risk for Boeing, US airlines.
DALLAS: US tariffs on European airplanes and luxury goods are emerging as a new threat not just for Airbus SE but for US airlines. The risk is rising for Boeing Co as well if the European Union seeks to retaliate.
The World Trade Organisation (WTO) would authorise the US to impose tariffs on nearly Us$8bil of European goods due to illegal state aid provided to Airbus, Bloomberg News reported on Wednesday.
The US duties, which could hit as soon as October, will target planes and aircraft parts as well as luxury products such as wine and leather goods, according to the US Trade Representative’s office.
The WTO decision marks an escalation in a long-running dispute that the US and EU have waged over aircraft-manufacturing subsidies, and will further test trans-atlantic relations that are already under stress from President Donald Trump’s “America First” strategy.
The deterioration endangers the cross-border ties that Boeing, Airbus and global airlines rely on. Airbus shares were down 0.6% at 120.28 euros at 9:17am in Paris yesterday.
“I’m a little concerned because this certainly fits the Trump administration’s aggressive approach to trade,” said Richard Aboulafia, aerospace analyst with Teal Group.
“Not crossing borders isn’t an option in this industry. Exports aren’t gravy in this business – they’re absolutely the lifeline.”
The WTO award is lower than the Trump administration’s request to impose tariffs on as much as Us$11.2bil worth of European exports stemming from the nearly 15-yearold dispute.
The US hasn’t finalised which goods it will hit, but the preliminary list also includes whiskey, motorcycles, leather handbags, cheese and wine. The duties may also hit products made by Europe’s producers of luxury brands – like LVMH Moet Hennessy Louis Vuitton SE, Christian Dior SE and Hermes International.
In the airline industry, US carriers are pushing back.
“It is unprecedented for the government to impose tariffs on aircraft,” said Airlines for America, a trade group.
“It’s widely believed that new tariffs on aircraft would negatively impact the US commercial aviation industry as well as the overall economy.”
An Airbus factory in Mobile, Alabama, depends on imported parts to build the company’s top-selling A320 family jets, which are also made in Europe and China.
The European planemaker plans to expand the US site to build the smaller A220 as orders increase from US carriers including Jetblue Airways Corp and Delta Air Lines Inc. “Imposing tariffs on aircraft that US companies have already committed to would inflict serious harm on US airlines, the millions of Americans they employ and the US travelling public,” Delta spokeswoman Lisa Hanna said in a statement.
In a statement, Airbus said it didn’t comment on “rumours on a report that is not public.” But the company said: “A tariffs battle is a no-win situation for the entire global aviation industry. Airbus continues to favour a negotiated solution to resolve this complex trade dispute.”
Boeing declined to comment.
In a separate WTO case, the EU claimed that Boeing benefitted from illegal subsidies, including from the state of Washington. That case is likely to conclude in the next six to nine months, according to Bank of America Corp.
Before that, the US may seek to “apply maximum pressure” while “targeting a settlement before the EU could legally apply tariffs to Boeing,” Bank of America analyst Benjamin Heelan said in a report this week.
Boeing, meanwhile, has a complicated agenda in Europe. The European Commission is conducting an antitrust review of the company’s proposed commercial-jet venture with Brazil’s Embraer SA.
European regulators are also conducting an independent safety assessment of Boeing’s 737 Max, which has been grounded more than six months.
“The certification process has become increasingly political,” Bernstein analyst Douglas Harned said in a report earlier this month on the WTO sanctions. “This type of action would likely make it worse.”
Imposing tariffs on aircraft that US companies have already committed to would inflict serious harm on US airlines, the millions of Americans they employ and the US travelling public.
Lisa Hanna