EU ready to hit US exports with tariffs over Boeing subsidies if talks fail

The World Trade Organization has cleared the way for the European Union to impose tariffs on $4 billion worth of US goods, including aircraft and ketchup.

The decision from the global trade body is the latest development in a long-running dispute over US subsidies to Boeing (BA) and EU aid to rival planemaker Airbus (EADSF).

The tariffs won’t be imposed immediately. The European Union must still ask for and receive an order from the WTO dispute settlement body to proceed with the tariffs, and a negotiated settlement is possible.

Tariffs act as a tax on exports and are either absorbed by producers in the form of reduced profits or passed on to consumers in higher prices.

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The European Commission said that it would prefer not to impose tariffs on American products entering Europe. “Additional duties are not in the economic interest of either side, particularly as we strive to recover from the Covid-19 recession,” EU trade commissioner Valdis Dombrovskis said in a statement.

Dombrovskis said he is in talks with US trade representative Robert Lighthizer and that he hopes the United States will drop the tariffs imposed on EU exports last year.

They followed a similar award by the WTO, in favor of the United States, relating to EU subsidies given to Airbus. That ruling resulted in the Trump administration imposing tariffs on $7.5 billion worth of European goods, including civil aircraft, Parmesan cheese, French wine and Scotch and Irish whiskies.

If the United States does not drop tariffs on EU goods, the bloc “will be forced to exercise our rights and impose similar tariffs,” Dombrovskis said.

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If that happens Boeing could be in the firing line. A list of US goods to be considered for tariffs by the European Union, published last April, includes aircraft.

The United States exported $46.5 billion worth of aircraft to the European Union in 2018, its single largest goods export to the bloc, according to the Office of the US Trade Representative.

Tariffs would come as yet another blow to the struggling US planemaker, which is already contending with a collapse in sales amid aviation’s worst ever crisis and ongoing struggles relating to the troubled 737 Max. Other items on the list of potential EU targets include ketchup, nuts, wheat, cereals and sunflower oil.

The European Union imposed tariffs in 2018 on $3 billion worth of US goods, including whiskey, motorcycles and denim, in response to US tariffs on EU steel and aluminum put in place by the Trump administration.

— James Frater contributed reporting.