Bad News for Boeing as European Union Places Tariffs on U.S. Aircraft

In the latest chapter in the 16-year European Union-U.S. trade row over subsidies for airframers, the EU said starting November 10, it will levy a 15% tariff on large civilian aircraft built in the U.S. That essentially means a tariff on Boeing aircraft.

In all, the EU can impose tariffs on $4 billion in U.S. goods. Although the original complaints involved subsidies from the U.S. to Boeing for civilian aircraft development, per World Trade Organization (WTO) rules, the EU's tariffs don't have to be limited to aircraft. The bloc also is applying a 25% tariff to chocolate, orange juice, and exercise equipment, and a variety of other U.S. imports.

“It is disappointing and surprising that Airbus and the EU have decided to impose tariffs on U.S.-headquartered companies and their Europe-based workers, suppliers and customers based on a tax provision that has been fully repealed," a Boeing spokesman said. "Instead of escalating this any further, we hope that Airbus and the EU will take meaningful action to resolve this trade dispute.”

The spat started in 2004, when the U.S. alleged the EU and several member states had provided illegal state aid to Airbus for the development of the A380 and eventually A350 programs. The next year, the EU alleged the U.S. government and Washington state had provided Boeing with illegal state aid and beneficial taxes for the 787 program, therefore harming Airbus.

The WTO ruled in favor of the U.S. case earlier this year and said last month the U.S. could apply tariffs to $7.5 billion in European goods. This week's ruling in the EU case found in favor of the EU and allows the bloc to apply tariffs to $4 billion in U.S. goods. "Regrettably, due to lack of progress with the U.S., we had no other choice but to impose these countermeasures," European Trade Commissioner Valdis Dombrovskis said.

The U.S. shot back. “The United States is disappointed by the action taken by the EU today,” U.S. Trade Representative Robert Lighthizer stated. “The EU has long proclaimed its commitment to following WTO rules, but today’s announcement shows they do so only when convenient to them.”   

The tariffs both sides have imposed can be reversed, however, if the two can reach a negotiated settlement. It is unclear if the outgoing administration of President Donald Trump will pursue a settlement, and the incoming administration of President-elect Joe Biden has not weighed in.

"Removing these tariffs is a win-win for both sides, especially with the pandemic wreaking havoc on our economies," Dombrovskies said. "We now have an opportunity to reboot our transatlantic cooperation and work together towards our shared goals.”

Note: This post has been updated with comments from Boeing.