The US wants to tax $11.2 billion worth of EU goods from jets to Cheese. The US tariff wish-list reflects Trump administration's calculation of the harm EU subsidies have inflicted on the US
The Trump administration wants to tax $11.2 billion worth of EU goods from aeroplanes to Gouda cheese, in what some experts say marks another attempt by the Trump administration to use tariffs to reshape global trade in its favour.
The World Trade Organization ruled last year that the European Union provided illegal subsidies to planemaker Airbus.
The US tariff wish-list, released late Monday, reflects the Trump administration's calculation of the harm the EU subsidies have inflicted on the United States and specifically to Boeing. A WTO arbitrator is expected to rule this summer on how much relief the US is actually entitled to.
Trade analysts say it isn't unusual for countries to present a tariff target list before the WTO arbitrator sets actual parameters. In the US case, it allows the Office of the US Trade Representative to collect public comments on the potential tariffs. And it lets the EU know which European industries might be hit and perhaps encourage a settlement.
Jennifer Hillman, a former US trade official who also served on the WTO's appellate body, said the US government typically would announce the target list quietly, perhaps through a notice in Federal Register.
Instead, she noted, Trump administration declared its intentions "with fanfare and hoo-ha" in a press release designed to attract public attention.
"You're scaring a lot of importers" who see the products they bring into the US on the target list, said Hillman, who now teaches law at Georgetown University. "You're creating chaos in the market."
Economists say the Trump team appears to want to use the ruling not merely to help Boeing but to heighten pressure on trading partners like Germany with which the US has a trade deficit.
In the end, more tariffs could further raise consumer prices in the United States and weigh on the global economy at a time when it's showing alarming signs of stress as the US wages a broader trade war with China.
After the US Trade Representative's office issued a list of EU products it wants to tax, President Donald Trump took to Twitter to make the case.
"The EU has taken advantage of the U.S. on trade for many years. It will soon stop!" Trump tweeted Tuesday.
The Trump administration's list of European products to tax includes the types of helicopters and aircraft Airbus makes but also a wide range of European exports: famous cheeses like Stilton, Roquefort and Gouda, wines and oysters but also more obscure exports like ceramics, knives and pyjamas.
The World Trade Organization finds that the European Union subsidies to Airbus has adversely impacted the United States, which will now put Tariffs on $11 Billion of EU products! The EU has taken advantage of the U.S. on trade for many years. It will soon stop!— Donald J. Trump (@realDonaldTrump) April 9, 2019
Smaller than China tariffs
Chad Bown, a senior fellow at the Peterson Institute for International Economics, said it would be "a game changer" if the United States actually imposed tariffs on Airbus planes.
"We've never done tariffs on aeroplanes before," he noted.
Normally, countries use favourable WTO rulings to compel trading partners "to give up the bad stuff they were doing" and don't actually end up imposing tariffs. Trump administration could be different.
"They just like to impose tariffs," Bown said.
While the size of the tariffs is small compared with the hundreds of billions the US and China are taxing in their trade war, it suggests a breakdown in talks with the European Union over trade. The US and EU have been negotiating since last year about how to avoid tariffs that Trump has wanted to impose, with little result.
Trump in June last year imposed tariffs of 25% on steel imports and 10% on imported aluminium from the EU in a move that seems aimed at helping the US industry but has also raised costs for many businesses that import these products.
The EU responded with tariffs on about 2.8 billion euros' worth ($3.4 billion) of US steel, agricultural and other products from Harley Davidson bikes to orange juice.
The US and EU have since July been negotiating how to scale back the tariffs, with Trump holding out the bigger threat of slapping tariffs on European cars — a huge industry in the region — should the negotiations not yield a result.
U.S. stocks fell at the start of trade Tuesday, amid the threat of a fresh escalation of tensions on tariffs with the European Union https://t.co/SnfuTdqARq pic.twitter.com/wsqqQnkyeT— MarketWatch (@MarketWatch) April 9, 2019
'New tariffs not based on WTO'
The EU responded Tuesday to the US' latest call for new tariffs by noting that it was based on America's own estimate, not anything it had been awarded by the WTO.
Eric Schweitzer, the head of the Association of German Chambers of Commerce and Industry, lamented the trade tensions.
"There are already more than enough tariffs," he said. "Instead of the US making further threats, both sides should now keep a cool head and aim for de-escalation."
Whether the US gets the legal right to implement the new tariffs will depend on a ruling by the WTO, an organisation based in Geneva that sets the rules for global commerce and settles disputes.
After 14 years of legal wrangling between the US and EU, the WTO ruled in May last year that the EU had provided some illegal subsidies to Airbus, hurting Boeing.
The WTO also ruled last month that Boeing received illegal tax breaks from Washington state and that the EU could seek damages.
But the ruling was limited: The state tax subsidies came to only about $100 million.
The US attempt to tax Airbus jets comes just as Boeing is facing broad challenges over the global grounding of its 737 Max airliners amid concerns that technical problems could have contributed to two crashes in five months.
Tariffs on European aeroplanes could in theory help Boeing and hurt Airbus, whose shares were down almost two percent on Tuesday.