A stopped clock is still right twice a day, the saying goes, and similarly U.S. President Donald Trump may actually be on solid ground in a new trade dispute with close American allies – although as usual his own statements and approach are doing nothing to bolster the case or persuade skeptics. Trump has threatened to levy $11 billion of tariffs on European goods in response to what he says are unfair European subsidies to Airbus, including “launch aid” that gave a leg up to a number of new Airbus models over the years.
- The tariffs, targeting exports of wine, cheese, clothes and aircraft parts, are widely seen as supporting Airbus’ main U.S. competitor, Boeing. The timing is bad, to say the least, as Boeing is now embroiled in a public relations nightmare due to its handling of technical problems with autopilot features that are blamed for the crash of two new 737 MAX planes. However the trade dispute has a long pedigree, going back at least 15 years, and is not one-sided: the Europeans have previously accused state governments in the U.S. of subsidizing Boeing.
- This time, at least, Trump may actually have a point: the WTO has previously ruled that the state subsidies, from Washington state and South Carolina, do not approach the magnitude of European government subsidies to Boeing. Meaning it’s all relative in the world of subsidies, apparently. Also importantly, this time around the administration isn’t invoking far-fetched national security concerns, as it did with autos, but rather is playing by WTO rules.
- Further, the $11 billion figure is roughly in line with the penalty that the WTO would probably allow if the dispute comes to adjudication, although hopefully it won’t have to because…
- The White House’s trade negotiators say they want to resolve the dispute amicably. Robert Lighthizer avers: “Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft.”
- No surprise, European trade chiefs are pushing back, hoping to dissuade the impetuous U.S. president or at least score a PR victory, in part by invoking one of Trump’s favorite bogeymen. French finance chief Bruno Le Maire warns that the only beneficiary of a U.S.-Europe trade dispute in civil aviation would be, yes, China, adding: “A clash between Boeing and Airbus would be absurd simply because our two industries are totally intertwined, we depend on each other for a number of components.”
- Also no surprise, the Europeans are also considering retaliation of their own, though only those permitted under WTO rules. Reports put the total number at up to 20 billion euros.
