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EU Urges US to Drop Aircraft Tariffs or Face $4 Billion in Exports Duties

The European Commission’s new trade chief Valdis Dombrovskis is gearing up for a fight with the United States in the nearly 16-year aircraft-subsidies dispute, warning the U.S. on possible tariffs on its exports to European Union-member nations.

The dispute was over rival subsidies involving American firm Boeing Co. and European firm Airbus SE. The Airbus dispute was further along in arbitration, resulting in a World Trade Organization (WTO) decision on damages last year. The Trump administration moved quickly to impose $7.5 billion in tariffs on EU imports, using the tariffs to pay down the amount in damages owed.

The U.S. currently has a 15 percent tariff on imports of Airbus aircraft and a higher 25 percent tax on select European imports, such as duties on handbags over $20, wool sweaters, cashmere, cotton and men’s and boys’ suiting. Both the U.S. and the E.U. have been in talks this year to resolve their dispute, and the U.S. even offered an olive branch in August by not raising the tariff rate, opting instead to adjust the items that would get taxed. In that adjustment, Greek and German cheeses were removed and replaced by duties on French and German jams.

All that could change again in a matter of weeks. That’s because the WTO arbitrator last month reportedly awarded the EU damages of $4 billion in its Boeing dispute, although the decision hasn’t yet been published.

Both sides reportedly were told of the arbitration decision on Friday. As the E.U. ponders its next step once the decision is made public, Dombrovski has already urged the U.S. to work on a settlement of the dispute. He has said that the U.S. should withdraw its Airbus-related tariffs as a good-faith measure, the Financial Times reported Sunday, quoting the European Commission trade chief as stating, “Of course, if the U.S. is not withdrawing their tariffs we have no choice but to then introduce our tariffs.”

Any E.U. tariffs imposed on American exports are not likely to be applied until after the Nov. 3 U.S. presidential election.

The FT article noted that Dombrovski declined to speculate on the possibility of a Joe Biden presidency, the Democratic challenger to Republican-incumbent Trump. Nor did he comment on what its impact might be on the presidency, although he pointed out that America’s protectionist stance emerged when Trump took office and that the EU in its talks to foster an approach of “multilateralism.”