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Oct. 2, 2019, 7:02 p.m. EDT

U.S. plans tariffs on $7.5 billion of European imports after winning WTO ruling

Green light comes after ruling that EU favored Airbus over Boeing

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By Associated Press

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“This means it’s not some sort of arbitrary question but a verdict according to international law that now weighs on Airbus, one must sadly say,” she told reporters in Berlin. “We have to see how the Americans will react now.”

The WTO in May 2018 found that EU aid for Airbus had resulted in lost sales for Boeing in the twin-aisle and very large-aircraft markets. The ruling centered on Airbus’ 350XWB — a rival of Boeing’s 787 — and the double-decker A380, which tops the Boeing 747 as the world’s largest commercial passenger plane.

Airbus and Boeing dominate the market for large airliners, and Boeing’s deliveries have plummeted this year because of the grounding of its 737 Max jet after two deadly crashes. This limits options for airlines looking to expand their fleets to accommodate increased air travel.

U.S. airlines have argued against tariffs on planes and parts that they buy from Europe, and they have mobilized supporters in Congress. In a letter this week to Trade Representative Robert Lighthizer, 34 congressional Republicans and Democrats expressed opposition to tariffs on imported airplanes and parts. And they suggested that if the tariffs were imposed that they apply only to future orders.

The lawmakers noted that because aircraft orders usually stretch out years, it’s hard for airlines to change or cancel them. Tariffs on European planes “would simply make these aircraft more expensive ... and would do nothing to encourage the EU to end the illegal subsidies,” they wrote. By contrast, they said, imposing tariffs only on future orders from the EU would give airlines an incentive to buy U.S.-made planes.

The case itself dates to 2004, a testament to the plodding and thorough rhythm of the Geneva-based trade body.

Rod Hunter, a partner at the law firm Baker McKenzie and a former White House economic official, saw three possible outcomes: The EU can end the offending subsidies to Airbus, decide to absorb the tariffs or try to reach a negotiated settlement with the Trump administration.

In a statement, Lighthizer said, “We expect to enter into negotiations with the European Union aimed at resolving this issue in a way that will benefit American workers.”

The $7.5 billion represents a fraction of EU exports to the United States, which last year amounted to $688 billion.

But the specter of more tariffs comes at a sensitive time. Trump’s aggressive use of tariffs — especially against China — has shaken financial markets, hobbled global trade and hurt manufacturers paralyzed with uncertainty about where to buy supplies, situate factories and sell their products. On Tuesday, a private index of U.S. manufacturing output dropped to its lowest level since the recession year 2009.

“The market effect could be larger than just the impact on the European exports and their U.S. customers,’’ Hunter said.

Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics and a former U.S. trade official, cast doubt on prospects for a EU-US trade deal that will ease tensions and ward off tit-for-tat tariffs, at least before the 2020 U.S. presidential election.

“Election years are bad for trade deals,’’ Hufbauer said.

The WTO is already examining a dozen cases involving U.S. tariffs and countermeasures brought by its trading partners over the administration’s steel and aluminum tariffs. Trump has insisted the move is needed to protect U.S. national security interests, but the Europeans claim it is simply protectionism and breaks global trade rules.

The EU has introduced “rebalancing” tariffs on about 2.8 billion euros ($3 billion) of U.S. steel, agricultural and other products. Trump has also threatened to slap duties on European automakers.

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