The World Trade Organization (WTO) made an important decision. The WTO has ruled that the European Union can impose around $4 billion in tariffs on U.S. goods, including aircraft and ketchup. It is worth mentioning that, the decision from WTO is the latest in a long-running dispute, regarding the subsidies to Boeing and Airbus. As a reminder, both of them dominate the market when it comes to commercial aircraft.
People should take into consideration that, the tariffs won’t be imposed immediately. Importantly, the European Union has to ask for and receive an order from the WTO dispute settlement body to impose tariffs. Moreover, a negotiated settlement is another option.
Interestingly, tariffs act as a tax on exports. The producers have the ability to absorb tariffs in the form of reduced profits. Another option is to increase the price of a product.
Hopefully, the European Commission prefers not to impose tariffs on American products. According to the EU trade commissioner Valdis Dombrovskis, additional duties are not in the economic interest of the EU as well as the U.S. The top priority is to get the economy back on track, and additional tariffs have the potential to cause problems.
Moreover, the EU trade commissioner hopes the U.S. will drop the tariffs imposed on EU exports in 2019. As a reminder, he is in talks with the U.S. trade representative Robert Lighthizer. However, it is hard to say whether the U.S. is willing to drop the tariffs or not. Nevertheless, both sides should work together to find a solution.
World Trade Organization and long-running dispute
In 2019, the World Trade Organization ruled in favor of the U.S. regarding the EU subsidies provided to Airbus. The Trump administration imposed tariffs on $7.5 billion worth of European goods, including civilian aircraft, Parmesan cheese, French wine as well as Scotch and Irish whiskies.
U.S authorities should keep in mind that, if they do not drop tariffs on EU goods, the bloc will impose tariffs on U.S. goods.
Interestingly, Boeing could suffer significant losses, due to tariffs. As a reminder, a list of U.S. goods to be considered for tariffs includes aircraft. In 2018, the U.S. exported $46.5 billion worth of aircraft to the EU. This fact once more underlines the severity of the problem and both sides should join forces to avert this threat. Importantly, even without the tariffs, Boeing is struggling to cope with problems. Moreover, Boeing can’t afford to lose the EU market. Both sides should work together to solve their disagreement as soon as possible.