U.S. Tariffs Over EU Aircraft Subsidies

model of Boeing aircraft 737 max

The ongoing dispute between the U.S. and the EU regarding illegal government aid to Boeing Co. and Airbus SE has once again come to a head under the World Trade Organization (WTO). The WTO revealed these two enterprises (the largest plane manufacturers in the world) received billions of dollars in unlawful subsidies, making this the largest corporate trade dispute in history. The U.S. administration is awaiting the WTO’s final accounting of the damages caused by the unlawful aid and is expected to impose retaliatory tariffs on European products and imports.

The U.S. published an initial list of proposed tariffs on April 12th, with an estimated trade value of $21 billion. Most recently, the United States requested an additional list of tariffs over EU aircraft subsidies and supplemental products to be reviewed by the WTO, valued at an additional $4 billion in import value. While the WTO has found the EU subsidies to be in violation of international trade rules, it has yet to reach a verdict regarding the amount of countermeasure enforceable by the U.S. The WTO is expected to announce its verdict this summer.

Imports Affected by Tariffs

The United States’ initial list of proposed tariffs targeted not only EU aircraft carriers and aircraft parts but also apparel, ceramics, kitchenware, and agricultural products like cherries, meat, and pasta. The latest list includes tariffs on other vital imports, such as grains, metal products, cast-iron tubes and pipes, dairy products (cheese, butter, and yogurt), olives, and certain types of whiskey.

Cheese is just one example of how tariffs on a single product can make a significant impact on trade. America is the EU’s largest buyer for cheese products, with 76% of U.S. cheese imports coming from Europe in 2018. If the estimated tariffs are implemented, the quantity of cheese imported to the U.S. could decrease by 7,000 to 10,000 tons per year.

Many U.S. industries oppose the proposed tariffs in fear they will negatively impact business and trade. The Distilled Spirits Council of the United States commented on the additional list of tariffs, saying, “U.S. companies—from farmers to suppliers to retailers—are already being negatively impacted by the imposition of retaliatory tariffs by key trading partners on certain U.S. distilled spirits … and these additional tariffs will only inflict further harm.” The United States Trade Representative (USTR) is accepting public comments on the supplemental list of tariffs, particularly regarding whether the additional list could adversely affect small businesses and consumers in America. The USTR public hearing is scheduled to be held on August 5th.

What It Means for the Shipping and Logistics Industry

If the proposed tariffs on EU output go into effect, it will increase the cost of aircraft parts and manufacturing as well as agricultural goods imported from European producers. When prices for imported goods increase due to tariffs, Americans buy fewer imported products, and the shipping and logistics industry consequently ships fewer imports. When the demand for shipping and freight decreases, so do profit margins for freight forwarders. The shipping and logistics industry will have to form new relationships, identify alternative producers and allies, and optimize more cost-effective routes to stay ahead against reduced trade resulting from the tariffs.

Global Shipping’s Import and Export Consulting

International trade is complex, especially in the wake of proposed tariffs and the subsequent changes to imports and exports. Global Shipping understands the hassle and confusion surrounding shipping goods from one country to another. Our expert import and export consulting services ensure that you have a solution to every question for a seamless import/export process. Our consultants are experienced in every aspect of the business—not only do we specialize in advising importers and exporters, but we also provide customs brokerage and documentation services. Contact us today to complete your international shipping processes with help from experienced consultants.