— This is the script of CNBC's news report for China's CCTV on June 16, 2021, Wednesday.
In response to the agreement, stocks of Boeing and Airbus closed higher on Tuesday, both less than 1%. On top of the two airplane makers, dozens of various sectors of the United States and European Union were also relieved. Because of the dispute, these sectors suffered from lifted tariffs on $11.5 billion of goods, including Whiskey from the UK, cheese from France, pork, and olive oil from German and Spain. Since Airbus produces aircraft mostly in the UK, France, German, and Spain, these four countries suffered the most from retaliation tariffs. And stock markets of these countries performed well as the agreement was reached.
The dispute also cost the United States a lot. American importers have paid more than $1.1 billion of tariffs since the duties in the dispute took effect in 2019. As the dispute is costly, the two sides agreed on a temporary duty suspension earlier this year, making the final agreement not unexpected for many. Obviously, the dispute launched to protect important manufacturers in each bloc brought tariffs and adverse impact on broader industries, which is not worthy.
And now both Airbus and Boeing are struggling because of the pandemic, delivering at much lower rates than pre-pandemic levels, especially Boeing. At the same time, the civil aircraft industry in China and other countries is growing swiftly; Therefore the United States and Europe hope to jointly battle against other rising rivals. An analyst told us in an interview that the aircraft manufacturing industry is developing clean energy technology, which may inevitably require government subsidies, hence a truce in this regard is in the longer-term interests of both parties.
In the shorter term, the impact of the agreement on aircraft manufacturing can be limited. Amid the pandemic, demand for new airplanes is weak and prices of used ones are lower, which is becoming a new challenge for both Boeing and Airbus. The Wall Street Journal reports, citing data from Ishka, an international advisory firm, that a 15-year-old 737 was 20% cheaper this April than in January 2020 and a wide-body 777-300ER was 45% cheaper. New airline startups in Europe are opting to lease used aircraft. A 5-year-old Airbus A330s can be traded at discounts of more than 35%.
Another related issue raised by the settlement of this dispute is whether the U.S. and Europe may remove more tariffs. Among them, the most widely concerned is the tax on steel. In 2018, then U.S. President Trump announced to impose 25% tariffs on steel and 10% on aluminum imported from many places around the world, including the European Union, citing concerns of national security. Although Biden is willing to ease the tension with the EU, tariffs on steel are hard to be removed given the midterm election is about to happen next year and votes of steel-producing states are still very important to the Democratic Party and Biden himself.
Jacob Kirkegaard
Senior Fellow At The German Marshall Fund Of The United States
"From what Joe Biden has said, and maybe this is his sort of fundamentalism，I mean, he is a bit of a protectionist if you like, compared certainly to his Democratic predecessor, Barack Obama. I don't think the time is right for that. My sense is that the administration has clearly signaled that for basically domestic political reasons, they have a tough midterm coming up. The steel industry matters and some of these swing states."