Summary:
- The WTO ruled the US could retaliate for illegal government aid to Airbus
- The US is to implement duties on $7.5 billion worth of European exports
- The EU is expected to do the same next year when the WTO rules on the bloc’s dispute over US subsidies to Boeing
The World Trade Organization ruled on Wednesday that the United States could impose retaliatory tariffs on goods imported from the European Union for illegal subsidies to Airbus. The duties are expected to embrace goods worth $7.5 billion including large civil aircraft (a lower 10% rate) as well as other items like Irish and Scotch whiskies; wine, olives and cheese; as well as certain pork products, butter and yogurt from various European nations, according to the US Trade Representative’s Office. The official list should be known on October 14, the day until the WTO is to formally authorize the duties which then are expected to come into effect on October 18. Let us notice that the size of award was highest on record which could spark further concerns over US-EU trade sentiment going forward. It needs to be added that the EU will retaliate against any Airbus-related tariffs when the WTO rules early next year on the bloc’s dispute over US subsidies to Boeing, according to European Trade Commissioner Cecilia Malmstrom (Bloomberg). To sum up, in line with expectations the WTO ruling had added to already strained atmosphere between the two countries over forign trade. In our view, it will increase downside risks to global economic growth in the last quarter this year and especially next year.
The size of duties authorized by the WTO in regard to Airbus illegal subsidies was the largest on record. Source: Bloomberg
