By Syndication The Washington Post, Bloomberg · Shawn Donnan, Charlotte Ryan, Jonathan Stearns
In November, the EU instituted duties on some $4 billion in goods from the U.S. after gaining approval from the World Trade Organization. A year earlier, the U.S. sanctioned about $7.5 billion in imports from the EU including French wine and Scotch whisky.
The U.S. Trade Representative's office said on Wednesday that it was targeting more European products because the EU used a time period that affected "substantially more products than would have been covered" otherwise and "needs to take some measure to compensate for this unfairness."
The new goods affected include some aircraft-manufacturing parts, certain wines, and some cognac and other grape brandies from France and Germany. In a notice in the Federal Register, the USTR said the overall value of goods being hit remains $7.5 billion, after adjusting the time period in its sanctions to match the EU's.
Wednesday's move marks yet another chapter in trans-Atlantic tit-for-tat tariffs that have already seen some $11.5 billion in trade targeted. It comes even as the two sides were discussing a negotiated solution to a dispute over subsidies for widebody commercial aircraft that began almost two decades ago.
"In order to not escalate the situation, the United States is adjusting the product coverage by less than the full amount that would be justified utilizing the EU's chosen time period," the USTR said.
The Brussels-based European Commission said it "regrets" the latest U.S. move and signaled prospects for a negotiated settlement now rest with the incoming administration of President-elect Joe Biden.
"The U.S. action unilaterally disrupts the ongoing negotiation between the commission and USTR to find a settlement to the long-lasting aircraft disputes," the EU's executive arm said in an emailed statement on Thursday. "The EU will engage with the new U.S. administration at the earliest possible moment to continue these negotiations and find a lasting solution."
U.S. Trade Representative Robert Lighthizer and his EU counterpart, Valdis Dombrovskis, have both expressed their desire for a solution and were engaged in discussions in recent weeks. But the latest move reflects Lighthizer's skepticism that such a deal can be done with less than a month left in Donald Trump's presidency and that the EU may have been holding out to deal what they see as a more accommodating Biden administration. The changes take effect in mid-January, before Trump leaves office.
Biden and his top advisers have signaled their desire to repair trade and other relations with allies including the EU that have been strained by Trump's "America First" policies.
Airbus slammed the USTR decision as "counterproductive in every way," saying it would hurt U.S. manufacturing, workers and consumers and "will not contribute to a climate of trust to create a negotiated solution." In an email, it called for the EU to respond appropriately.
Both Airbus and Boeing have been hit hard by the pandemic and its impact on air travel. A recent surge in covid-19 cases in both Europe and the U.S. has also increased the likelihood of a double-dip recession in the EU and a slowing recovery in the U.S. economy. That could prolong the pain for both aircraft makers and raise the economic stakes for their home countries.
The European plane maker has production in five countries and assembles both A320 and A220 aircraft at a plant in Mobile, Ala. Those products haven't previously been subject to tariffs, while A320s completed in France and Germany are.
Airbus's U.S.-built aircraft could now be affected, given the extended levies now cover major parts like fuselage sections, wing and wing assemblies brought in from Europe, along with horizontal and vertical stabilizers, Jefferies analyst Sandy Morris said in a note.
Even A320 wings made in the U.K. -- which isn't targeted by the new measures -- are completed in Germany, Morris said.
"Our initial take is that tariffs now apply to major components of Airbus aircraft assembled in the USA," he said. "We hope the wider WTO matter can soon be resolved, but for now, Airbus may face additional disruption."
While Airbus has been able to avoid tariffs on its U.S.-made planes, Chicago-based Boeing doesn't assemble commercial aircraft in the EU. It has no option to avoid the costly tariffs imposed by the EU and customers like Ryanair Holdings Plc have said they won't pay the levy.