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EU-US Trade War Heats Up With $4B Tariffs on American-Made Goods

The European Union is making good on threats to increase tariffs on U.S. exports to the region with new duties going into effect on Tuesday.

According to a statement from aircraft manufacturer Boeing, which has been at the center of the increasing trade tension between the allies, countermeasures against the U.S. have been agreed upon by EU member states, and are set to move forward immediately.

In 2019, Washington imposed duties worth $7.5 billion on EU products as the result of a World Trade Organization arbitration decision that ruled in favor of the U.S. and American aircraft manufacturer Boeing. At the time, the WTO confirmed U.S. lawmakers’ charges that European multinational aerospace corporation Airbus, a direct competitor, benefitted unfairly from subsidies, negatively impacting Boeing’s business. Legislators moved swiftly to impose tariffs on EU goods that would pay down the damages.

In September, though, the WTO granted the EU and Airbus license to hit back, giving the green light to impose tariffs on U.S.-made goods worth $4 billion. On Oct. 26, the intergovernmental trade organization formally authorized the implementation of countermeasures against subsidies that have benefitted Boeing.

“We have made clear all along that we want to settle this long-running issue,” Valdis Dombrovskis, European commissioner for trade and executive vice president for Economy that Works for People said in a statement. “Regrettably, due to lack of progress with the U.S., we had no other choice but to impose these countermeasures.”

According to Dombrovskis, the EU is exercising its legal rights under the WTO’s decision, but is calling upon the U.S. to agree to both sides abandoning their respective countermeasures immediately.

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

Dombrovskis said that the proposed countermeasures from the EU bring it to “equal footing” with the U.S., with sizable tariffs on each side related to the aircraft subsidies. Those duties include additional 15 percent tariffs on aircrafts as well as 25 percent tariffs on a range of agricultural and industrial products imported from the U.S.

In 2019, the U.S. imposed punitive duties on a number of EU imports including handbags over $20, wool sweaters and vests, cashmere, cotton, men’s and boys’ suiting, and women’s and girls’ cotton pajamas. But in August, the Trump administration appeared to take a placatory stance, removing Greek and German cheeses and Scottish shortbread products from the list, likely because the U.S. was working toward a bilateral trade agreement with the U.K.

However, French and German jams were added to the list, sending a thinly veiled message to the leaders of both countries to heed America’s trade demands. The Trump administration implemented new 25 percent duties on $1.3 billion in goods from France in July, including luxury handbags, as a response to the country’s Digital Services Tax.

Notably, in September, William Reinsch, a former senior U.S. Commerce Department official and trade expert at the Council on Strategic and International Studies, said that the WTO’s decision on the EU’s behalf would “set the stage for negotiation.”

“Everybody’s been waiting for this,” he said at the time.