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US handbags, helicopters and hazelnuts all put on $20 billion EU tariff list after Boeing ruling

Key Points
  • The European Commission threatened to impose charges on U.S. imports worth $20 billion on Wednesday.
  • It comes after a World Trade Organization (WTO) ruling last month which said the U.S. government had failed to end illegal support of Boeing.
  • Both sides have agreed to open talks designed to reduce trade barriers.
An aerial photo shows Boeing 737 MAX airplanes parked on the tarmac at the Boeing Factory in Renton, Washington, U.S. March 21, 2019.
Lindsey Wasson | Reuters

Helicopters, handbags and hazelnuts are among the U.S. goods facing EU tariffs, after the European bloc hit back against U.S. subsidies of Boeing aircraft.

The European Commission threatened to impose charges on U.S. imports worth $20 billion on Wednesday, following a World Trade Organization (WTO) ruling last month which said the U.S. government had failed to end illegal support of Boeing.

In a mirror-like situation, Washington has previously said it is considering tariffs on approximately $11 billion worth of EU goods, which it said was in line with economic damage the U.S. had sustained by European subsidies to aeroplane and defense firm Airbus.

Both sides have agreed to open talks designed to reduce trade barriers.

The EU's 11-page catalog of items facing tariffs cover a range of U.S. products, from aircraft to chemicals and food products.

EU does not want 'tit-for-tat' trade row

"European companies must be able to compete on fair and equal terms. The recent WTO ruling on U.S. subsidies for Boeing is important in this respect. We must continue to defend a level-playing field for our industry," Cecilia Malmstrom, EU trade commissioner, said in a statement on Wednesday.

"But let me be clear, we do not want a tit-for-tat. While we need to be ready with countermeasures in case there is no other way out, I still believe that dialogue is what should prevail between important partners such as the EU and the U.S., including in bringing an end to this long-standing dispute," Malmstrom said.

Cecilia Malmstrom
Corbis News | Getty Images

The U.S. and EU have been battling each other for nearly 15 years at the WTO over subsidies given to Boeing and Airbus.

After partial victories for both sides, Washington and Brussels have both asked a WTO arbitrator to determine the level of countermeasures they can impose on one another. Arbitrators have yet to set an amount, but the U.S. case against Airbus is reportedly more advanced and a ruling is expected over the coming months.

"The EU has taken advantage of the U.S. on trade for many years. It will soon stop," President Donald Trump said via Twitter last week.

Trade talks

Trade talks between EU and U.S. officials are likely to get underway soon with two sets of negotiations — one to cut tariffs on industrial goods and another to make it easier for businesses to show that products meet EU or U.S. standards.

The European bloc has insisted it does not want agriculture to be included, putting it at loggerheads with the U.S., which wants farm products to be part of future discussions.

"We do not expect an escalating dispute that could sow uncertainty and hurt global industry as much as the U.S.-Chinese trade war has done in the last three quarters," Holger Schmieding, chief economist at Berenberg, said in a research note published Tuesday.

"In one key respect, the U.S.-EU trade talks could be similar to the lengthy renegotiation of NAFTA, in our view. While the talks could be difficult and noisy, they need not disrupt markets, confidence and economic activity very much," Schmieding said.

U.S. President Donald Trump and European Commission President Jean-Claude Juncker walk to the Rose Garden of the White House to deliver a joint statement on trade July 25, 2018 in Washington. 
Win McNamee | Getty Images

Trump shook the European Union last year when he decided to slap tariffs on European steel and aluminium. Brussels retaliated immediately, putting duties on denim, peanut butter and other American goods.

The EU also took the case to the WTO. To bridge their differences and, above all, prevent further duties on EU goods, European Commission President Jean-Claude Juncker traveled to Washington a couple of months later.

He agreed with Trump to work together to bring existing tariffs towards zero on non-auto industrial goods; to buy more liquefied natural gas from the U.S. and to find ways to bring their standards closer together.

On Monday, the 28 European countries finally adopted a common position to negotiate trade with the U.S. The EU wants a deal "strictly focused on industrial goods," thus excluding agricultural products – a proposal that President Trump does not like.

— CNBC's Silvia Amaro contributed to this report.