After more than a year-long trade dispute with China, the U.S. is now set to launch a second trade war, this time against its close ally; the European Union (EU) due to a ruling by the World Trade Organization (WTO) on Wednesday.
In a 15-year long dispute, the WTO ruled in favor of the U.S. over illegal subsidies and government support programs on European airplane manufacturer Airbus and its American rival Boeing.
The decision concluded that the EU subsidies to Airbus broke WTO rules, the international regulator said, and allowed Washington to impose countermeasures in the form of tariffs on $7.5 billion worth of European goods in response to the EU’s illegal subsidies.
"The award of $7.5 billion annually is by far the largest award in WTO history," U.S. Trade Representative Robert Lighthizer said in a statement Wednesday, adding tariffs on EU goods would be applied starting Oct. 18.
The list of levies include a 10% duty on Airbus planes, and a 25% tariff on French wine, Scotch and Irish whiskies, agricultural products, electromechanical tools and garments once Washington receives final approval from the WTO later this month.
"For years, Europe has been providing massive subsidies to Airbus that have seriously injured the U.S. aerospace industry and our workers," Lighthizer said in a statement.
Airbus released a statement on Wednesday stating that the U.S.' choice of imposing tariffs on aircrafts and their components would "create insecurity and disruption not only to the aerospace industry, but also to the broader global economy."
Airbus also stressed that the WTO will determine over the coming months the amount of tariff countermeasures the EU can impose on U.S. products, which includes imported U.S. Boeing aircraft, as part of the parallel counter case regarding illegal subsidies to Boeing.
"If applied, these tariffs on both sides will severely impact U.S. and EU industries, putting high costs on the acquisition of new aircraft for both U.S. and EU airlines," the statement read.
The European Commission also confirmed in a statement Wednesday that the parallel Boeing case could allow the EU to be equally granted rights in a few months by the WTO to impose countermeasures against the U.S. for its failure to comply with WTO rules.
"But if the U.S. decides to impose WTO authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than to do the same," the statement said.
In March 2018, U.S. President Donald Trump imposed tariffs of 25% on steel and 10% on aluminum imports from a number of countries and the EU. Trump also said he could impose additional tariffs on European cars and auto parts.
In retaliation, the EU imposed tariffs of 25% on U.S.-made whiskey and 31% on Harley-Davidson motorcycles in June 2018.
By Ovunc Kutlu