Europe Economy

EU trade chief says retaliatory tariffs on US possible before Boeing ruling

Key Points
  • The office of Robert Lighthizer, the U.S. trade representative, published a list of potential targets worth a total of roughly $25 billion back in April.
  • The administration of President Donald Trump has requested permission to introduce 100% tariffs on European products worth $11.2 billion.
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EU braces itself for possible US tariffs

Europe's top trade official told CNBC her "impression" was that the United States would introduce fresh tariffs on EU products as soon as this month, once a ruling from World Trade Organization arbitrators on the total value of allowable American countermeasures is released, as early as Wednesday.

After meeting with trade ministers from across Europe in Brussels Tuesday, Cecilia Malmstrom, whose term as EU trade commissioner is slated to end on October 31, acknowledged in a press conference that she had "not received any positive response" to European proposals to avoid immediate tariffs.

The office of Robert Lighthizer, the U.S. trade representative, published a list of potential targets worth a total of roughly $25 billion back in April, and the administration of President Donald Trump has requested permission to introduce 100% tariffs on European products worth $11.2 billion.

Arbitrators must determine if that amount is proportionate and reasonable, or whether it should be lower, as the Europeans have requested.

The decision expected from the global trade body this week is in response to long-standing U.S. complaints that certain European nations provided state aid to aircraft manufacturer Airbus.

A similar WTO ruling on prohibited tax concessions and government research support for Airbus' U.S. competitor, Boeing, will be published in a few months, and would grant the EU a corresponding green light to impose retaliatory tariffs on American products.

The parallel nature of that second ruling has meant Malmstrom still hopes for a negotiated agreement "until the very last moment," she told reporters Tuesday.

"We have repeated for a very long time to our U.S. counterparts, that even if we have both made errors, and that, strictly speaking we can impose tariffs on each other, this is not a good way," she said.

Yet she left open the option that the EU could take advantage of previous WTO rulings that had gone against the U.S., which still theoretically permitted Europe the right to impose trade countermeasures, even in cases that had been dormant for years.

"We're looking at everything — (it) doesn't mean that we will use these possibilities, but everything is on the table."

European Commissioner Cecilia Malmstrom holds a news conference in Brussels, Belgium March 7, 2018.
Eric Vidal | Reuters

Such an approach would allow Europe to respond to possible U.S. tariffs well before the Boeing ruling that is expected in the spring, while continuing to act within the parameters provided by the WTO.

But Malmstrom acknowledged that pursuing that course of action could escalate tensions even further, and she reiterated that her "Plan A" remains the avoidance of tariffs altogether.

"It comes at an unfortunate moment in time, because this has been going on for almost two decades," she said of the complaint about Airbus subsidies that began in 1968.

Her sequencing of priorities — talks first, then retaliatory tariffs if required — appeared to have found favor among European ministers who arrived in Brussels for talks with her and their national counterparts.

"We need, I think, to deescalate the situations," said Jean-Baptiste Lemoyne, French secretary of state for Europe and foreign affairs. "But if the U.S. persist to use this strategy to put tariffs, of course, the EU must answer."