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US and UK Pause Tariff Feud

On Thursday, 16 years of transatlantic trade tension reached a détente.

The U.S. and the U.K jointly announced a cease-fire on duties stemming from the dispute surrounding large civilian aircrafts made by competing manufacturers Boeing and Airbus. “The United Kingdom and the United States are undertaking a four-month tariff suspension to ease the burden on industry,” they wrote, noting their “bold, joint step towards resolving the longest running disputes at the World Trade Organization.”

The conflict originated over whether European multinational aerospace corporation Airbus unfairly benefited from subsidies, giving it a leg up over American rival Boeing. In 2019, the WTO ruled in favor of the charges laid out by U.S. lawmakers, and legislators quickly slapped $7.5 billion in tariffs on goods from the EU in an effort to pay down the damages already incurred. The action impacted a range of EU imports, including items like luxury handbags, wool sweaters and vests, cashmere, and cotton, affecting the luxury tailors of Savile Row, among others.

By September of 2020, several EU states were ready to retaliate, and were granted liberty to do so by yet another WTO ruling. The EU and Airbus hit back with the imposition of $4 billion in new tariffs on U.S.-made products—including a 15-percent addition of duties on aircrafts and 25 percent tariffs on agricultural and industrial imports—as a countermeasure against subsidies that benefitted Boeing. When the actions took effect in October, Valdis Dombrovskis, European commissioner for trade and executive vice president for Economy that Works for People, expressed frustration at the development.

“We have made clear all along that we want to settle this long-running issue,” he said. “Regrettably, due to lack of progress with the U.S., we had no other choice but to impose these countermeasures.”

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The U.K. ceased applying those retaliatory tariffs just months later on Jan. 1. The rollback was an effort to “de-escalate the issue and create space for a negotiated settlement to the Airbus and Boeing disputes,” the British government stated.

The move appears to have worked, as the U.S. suspended its own duties beginning March 4. The four-month détente “will allow time to focus on negotiating a balanced settlement to the disputes,” the governments said. It also highlighted a desire from both nations to “begin seriously addressing the challenges posed by new entrants to the civil aviation market from non-market economies,” naming China in particular.

The decision stands to benefit a wide range of industries “on both sides of the Atlantic,” they added. What’s more, the respite from trade actions will allow for “focused settlement negotiations to ensure that our aerospace industries can finally see a resolution” to a conflict that has lasted nearly two decades, allowing both nations to “focus on Covid recovery and other shared goals.”

Helen Brocklebank, CEO of British luxury advocacy group Walpole, described the development as “very welcome” news.

“Globally famous brands like dunhill, Glenfiddich whisky, Hendrick’s Gin, Johnstons of Elgin and Peter Reed have helped create a ‘jewel in the crown’ luxury sector that was growing at nearly 10 percent each year before the pandemic, worth 48 billion pounds ($66 billion) to the UK economy,” she said in a statement Thursday. “The impacts of the tariffs on British luxury businesses have been disproportionate and resulted from a dispute not of our sector’s making.”

Brocklebank hopes scrapping the tariff tit-for-tat means renewed trade cooperation is on the horizon, questioning if the news “signals that our Government and the new US administration will break new ground with a speedy free-trade agreement.”

“It’s imperative that both sides are now successful in reaching a negotiated settlement resulting in the permanent removal of the tariffs,” she said. “A much-needed intervention as the British luxury sector recovers from the pandemic.”