WASHINGTON – The World Trade Organization granted the United States permission to impose tariffs on as much as $7.5 billion of European products annually as part of a long-running complaint over subsidies given to European plane maker Airbus, clearing the way for the Trump administration to tax airplanes, wine and other goods from Europe.
The ruling is the largest authorized retaliation in the WTO’s history, and it brings to an end a roughly 15-year dispute over the financial assistance that Europe provides to its major plane maker. But it could tip off a further escalation, worsening tensions between the U.S. and the European Union that have been strained by President Donald Trump’s confrontational approach to trade.
The WTO ruled last May that Europe had illegally subsidized several Airbus models, to the detriment of its American competitor, Boeing. In the ruling this week, the global trade body announced the value of the damages that the U.S. could seek to recoup by imposing tariffs.
The U.S. Trade Representative has prepared two lists of as much as $25 billion worth of products that it might tax, including airplanes, fish, wine, leather purses, carpets and clocks. It is expected to soon announce which goods will be taxed.
Europe is prepared to respond to U.S. tariffs with its own levies. The WTO is considering a parallel case that the European Union has brought against the U.S. for subsidizing Boeing, and the E.U. has drawn its own list of $20 billion in U.S. products that it could tax in response to that case. The WTO is expected to announce that decision early next year.
Cecilia Malmstrom, the European commissioner for trade, said that even though the United States had obtained WTO permission to levy tariffs, “opting for applying countermeasures now would be shortsighted and counterproductive.”
“Both the E.U. and the U.S. have been found at fault by the WTO dispute settlement system,” she said. “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.”
An escalating trade spat with Europe would open another front in the global trade war that Trump has undertaken to try and change trade terms that he says have disadvantaged the United States. The president has already imposed tariffs on more than $360 billion of products from China, in addition to levies on washing machines, solar panels and steel and aluminum from Japan and Europe.
Those actions have raised the average U.S. tariff rate to levels not seen in decades. The United States now has the highest tariff levels of any of the Group of 7 industrialized nations.
Markets sank Wednesday, following fresh evidence that the trade war is weighing on the global economy.
The WTO on Tuesday slashed its forecast for global trade growth this and next year. And a closely watched gauge of American manufacturing showed factory activity slowed in September, the second straight month of decline. New export orders in particular plummeted, suggesting a further trade downturn to come.