The World Trade Organization (WTO) issued a decision that the European Union (EU) is authorized to impose tariffs on approximately $4 billion worth of annual imports from the United States, an amount the WTO found to be “commensurate with the degree and nature of the adverse effects determined to exist.” The WTO’s decision is part of a long-time dispute between the United States and the EU over their respective subsidies to Boeing and Airbus.
Last year, the WTO ruled in favor of the U.S. in its parallel complaint against the EU over Airbus subsidies, authorizing the U.S. to impose tariffs on up to approximately $7.5 billion worth of imports from the EU. Following last year’s WTO decision, the United States Trade Representative (USTR) imposed a 10 percent duty on large civil aircraft (later increased to 15 percent) and a 25 percent duty on certain other goods imported from the EU.
The WTO’s ruling in favor of the EU effectively allows the EU to retaliate to those U.S. tariffs. EU Trade Commissioner Valdis Dombrovkis stated that he “would much prefer not to do so”, but is “fully prepared for this possibility”. The EU has prepared a preliminary list of U.S.-origin products that it would consider for additional import duties, which consists largely of food products, alcohol and tobacco, handbags and wallets, and civil aircraft. The European Commission’s press release on the matter indicates that the EU aims to settle the dispute through negotiations with the United States, rather than to immediately implement new tariffs.
USTR responded to the WTO’s decision, asserting that the EU had no legal basis to impose aircraft tariffs of its own, since the WTO only authorized retaliation to a Washington State Business & Occupation tax break that was repealed on April 1, 2020. USTR argues that “under WTO rules, a WTO Member can apply authorized countermeasures only until the illegal measure, or the harm from that measure, is eliminated, which has already occurred in this dispute.”