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Next Up in Trade: US Tariffs on EU Apparel and Textiles

The next batch of tariffs the United States puts in place could be on imports of European goods, extending the trade war across the Atlantic.

In a ruling Wednesday, the World Trade Organization issued its findings in the back-and-forth dispute over subsidies the European Union (specifically, Germany, France, the U.K. and Spain) provided to French aerospace company Airbus, saying the U.S. can, in fact, tariff EU products as a countermeasure, provided they are commensurate with the degree of damage.

And “commensurate,” according to the WTO, amounts to $7.5 billion per year for the 2011-2013 reference period. “Suspension of tariff concessions” is one allowable countermeasure—meaning the U.S. can tariff $7.5 billion worth of EU goods imports that it may not have been taxing before.

In April, the Office of the U.S. Trade Representative (USTR) had said it wanted to impose duties “up to 100 percent on products of the EU or certain Member States,” which would have been valued at $21 billion.

At that time, products under consideration for new tariffs included items like handbags, cotton yarn, synthetic staple fibers, sweaters, anoraks, wool suits and swimwear.

So far, President Trump has yet to fire off a tweet regarding the matter, but the USTR is expected to issue a statement later today.

European Commissioner for Trade Cecilia Malmström said in response to the ruling Wednesday, that, despite the ruling, if the U.S. does opt to use tariffs as a countermeasure, it would be “short-sighted and counterproductive.”

“Both the EU and the U.S. have been found at fault by the WTO dispute settlement system for continuing to provide certain unlawful subsidies to their aircraft manufacturers,” Malmström said, noting that “in some months” the EU would also be granted rights to impose countermeasures for subsidies it has claimed, in a separate case due for a ruling in roughly eight months, that the U.S. provided for Boeing.

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As such, another tariff battle could be on the trade community’s hands, though if Malmström has it her way, that’s not how things will go.

“The mutual imposition of countermeasures, however, would only inflict damage on businesses and citizens on both sides of the Atlantic, and harm global trade and the broader aviation industry at a sensitive time,” she said. “Our readiness to find a fair settlement remains unchanged. But if the U.S. decides to impose WTO authorised countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same.”

New tariffs from either side could also see costs for air travel increase, which could pose added pressure for companies already fighting to reduce overhead in hopes of maintaining margins amid already in place tariffs.