Economy

Huge trade tariffs could hit Europe next week if US wins WTO dispute

Key Points
  • Separate reports suggest that the United States is poised to win its long-running trade dispute with EU countries over alleged subsidies for Airbus.
  • If confirmed, Washington will be allowed to hit the EU with billions in tariffs on several European exports.
  • The European Union has its own similar case underway, accusing the U.S. of illegally aiding Boeing.

The World Trade Organization (WTO) is set to back a U.S. request to impose tariffs on billions of dollars of European goods, potentially sparking a new trade war across the Atlantic, several media reports suggest.

Arbitrators from the WTO are meeting at 10.am. local time in Geneva on Monday to finalize a 15-year-old case brought by the United States. The U.S. seeks compensation for what they say are illegal subsidies granted to the plane maker Airbus by European governments.

Earlier this month, Airbus shares dipped sharply following reports that the WTO will rule in favor of the U.S, granting President Donald Trump the right to slap billions of dollars of tariffs in compensation.

Washington has said it wants to impose tariffs of up to 100% on European exports to the U.S. with an annual trade value of around $11.2 billion a year.

Reuters, quoting sources, reported Thursday that the United States government won't get to that figure but will win the right to impose tariffs on EU goods worth around $7.5 billion annually.

The United States has already drawn up a wide-ranging list of European goods which it says it will select from, once the WTO determines an appropriate amount.

Aside from European-built aircraft and parts, goods on the list included motorcycles, food, drink, clothes, base metal parts and equipment to make jewelry.

Europe seeks Boeing revenge

The EU has its own separate case before the WTO, in which it argues that the U.S. plane maker Boeing receives unfair financial assistance from the U.S. federal government. That ruling from arbitrators in Switzerland is estimated to be about nine months away.

Airbus's Chief Commercial Officer (CCO), Christian Scherer, told CNBC last week that the legal action was unlikely to benefit either firm.

"I don't think that the aerospace communities or ecosystems on either side of the Atlantic have anything to gain (by) going at each other's jugular," he said at the launch of the firm's annual commercial outlook.

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In April this year, the European Commission launched a public consultation on its preliminary list of products from the United States that it would seek to hit with import tariffs.

The list, representing about $20 billion worth of U.S. exports to the EU, also covered a wide range of items including aircraft, chemicals and food products such as frozen fish and citrus fruit.