Investor Alert

June 15, 2021, 7:35 a.m. EDT

U.S. and European Union agree truce over Boeing and Airbus subsidies

By Steve Goldstein

The 17-year dispute between the U.S. and Europe over airplane subsidies isn’t quite over, but a truce has been reached.

The two sides have agreed on a five-year truce over the subsidies given to rival aircraft manufacturers Boeing (NYS:BA) and Airbus (PAR:FR:AIR) , according to U.S. Trade Representative Katherine Tai.

“We agreed to work together to challenge and counter China’s non-market practices in this sector in specific ways that reflect our standards for fair competition,” said Tai.

The pact is set to be announced during President Joe Biden’s summit with European Commission President Ursula von der Leyen, and is a sign of his desire to improve trans-Atlantic relations after several flare-ups during the Trump administration. It also is a sign of the broader U.S. and European desire to turn their attention toward a common foe, China.

Airbus shares rose 1% in Paris trade and have climbed 27% this year on hopes that the rollout of COVID-19 vaccines will boost travel. Boeing shares edged up 1% in premarket trade and have climbed 15% this year.

The World Trade Organization had let both sides impose tariffs on the other, with the U.S. allowed to add tariffs to $7.5 billion of European Union goods and the EU allowed to add tariffs to $4 billion of U.S. goods. In March, both sides agreed to suspend the levies on items like French wine and U.S. tractors. Tariffs had been suspended in March in order for a deal to be reached.

“These tariffs will remain suspended so long as EU support for Airbus is consistent with the terms of this agreement.  Should EU support cross a red line and U.S. producers are not able to compete fairly and on a level playing field, the United States retains the flexibility to reactivate the tariffs that are being suspended,” said Tai.

The two sides have other outstanding trade disputes. The Trump administration imposed tariffs on EU steel and aluminum that have yet to be rolled back. The two sides also are at odds over a range of issues concerning the technology sector, from taxes to competition to privacy.

A senior administration official in the White House said the two sides held constructive talks over aluminum but that a deal will take time.

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