The World Trade Organization (WTO) has found both Airbus and Boeing have received billions of pounds of illegal subsidies in two cases that have run for 15 years.

As a result the WTO arbiters yesterday gave the US permission to impose tariffs on $7.5 billion of EU goods annually, a move that may escalate into a trade war.

The US will now impose a 10% tariff on Airbus planes, as well as a 25% tariff on French wine, Scotch and Irish whiskies, and cheese from across Europe.

“Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies,” US Trade Representative Robert Lighthizer said of the ruling. “We expect to enter into negotiations with the European Union aimed at resolving this issue in a way that will benefit American workers.”

Airbus spokesperson Clay McConnell responded: “Airbus considers that the only way to prevent the negative effects that these countermeasures would create will be for the U.S. and EU to find a resolution to this long-running dispute through a negotiated settlement before the tariffs become effective.”

The 10% tariff could severely impact the airline industry, in Europe and the US. Many US airlines are customers of Airbus, such as Delta which has about 170 Airbus planes ordered that may be affected.

Delta responded in a statement: “Aircraft are significant purchases requiring long-lead times for production – often years in advance. Imposing tariffs on aircraft that US companies have already committed to will inflict serious harm on US airlines, the millions of Americans they employ and the traveling public.”

What does this mean for manufacturing?

Airbus employs over 13,000 people at two sites in the UK which produce the wings for Airbus aircraft. Filton is where the engineering and design activity takes place along with some manufacturing, and the site in Broughton is where all wing assembly takes place, and other major wing component manufacturing as well.

This ruling may discourage US airlines from purchasing Airbus planes, and those financial decisions could ripple down the balance sheets of the aerospace giant, and ultimately impact prices in the supply chain.

No tariffs will be imposed on EU-manufactured aerospace parts used in Airbus’ A220 assembly line in Alabama, or those used by Boeing for its planes. This will act to protect the US manufacturing industry from being punished.

UK Government’s response

The Department for International Trade has responded to the WTO ruling with the statement below:

“The World Trade Organization (WTO) plays a vital role in enforcing the global trade rules and resolving disputes between nations.

“The WTO has today issued its ruling on US retaliation rights in the Airbus dispute. It states that the US can be authorised to apply tariffs worth $7.497 billion annually on the UK, France, Germany, Spain and the wider EU.

“The UK government is clear that resorting to tariffs is not in the interests of the UK, EU or US. We are working closely with the US, EU and European partners to support a negotiated settlement to the Airbus and Boeing disputes.

“We are also seeking confirmation from the WTO that the UK has complied fully with WTO rulings regarding support to Airbus, and should not be subject to tariffs.”

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