Aero-Tariffs: A Look at the 17-Year Trade Dispute Surrounding Airbus and Boeing
Imagine a scenario where a close family member continues to bring up politics at holiday get-togethers. You strongly disagree with these politics. You can’t get rid of this person because, well, it’s your family but you realize that despite the disputes every time you see each other, you should probably co-exist for the good of everyone else. Now imagine, that this ‘spat’ has lasted nearly two decades and there’s finally something you can agree on—to stop talking politics at the dinner table. Enter Boeing and Airbus.
The 17-year trade dispute between these two aerospace mammoths has rendered some of the biggest World Trade Organization (WTO) judgments in history amounting to over $11.5 billion in transatlantic trade. This all began back in 2004. The U.S. accused Airbus host nations (Spain, France, Britain, and Germany) and the E.U. accused Washington-based Boeing of alleged unfair subsidies via government loans referring to WTO’s Agreement on Subsidies and Countervailing Measures. In layman’s terms, they blamed each other for getting more cash/tax breaks from their host countries, which in turn created an unfair advantage over the other. Since these initial claims, the WTO has made several rulings over these allegations, which can be found in a detailed timeline here.
The cases continued to make their way through the justice system until 2019 when the WTO okayed the U.S. to retaliate with tariffs against $7.5 billion worth of EU exports annually. The following year, the EU was given the green light to strike back with retaliatory tariffs amounting to $4 billion of U.S. goods annually. The U.S. hit the EU right at the purse strings, literally. Luxury brands such as Fendi, Louis Vuitton, and LVMH were all subject to fresh tariffs. On the other side of the coin, the EU slapped tariffs on U.S. brands ranging from Microsoft to Caterpillar.
So, why can’t we all just get along? We’re allies after all and realistically, one aerospace giant can’t live without the other. The Biden Administration agrees. President Biden and European Commission President, Ursula von der Leyen agreed to suspend the tariffs back in March both citing a restoration of confidence, trust, and reaching a long-lasting solution. With the suspension ending July 10, the clock is ticking. U.S. Trade Representative Katherine Tai is optimistic, and the EU is anxious to reset relations with the U.S., which had soured during the Trump Administration. According to Reuters, Tai stated, “It’s impossible to predict the organic development of any negotiation. But I want to underscore how optimistic I am. We are giving it everything we’ve got. I also feel confident that that is being reciprocated across the table.”
It’s tough to say whether the U.S. and EU can come to a sound consensus or if they’ll have to re-apply for tariffs on July 11 if there is no solution. This will become more apparent when President Biden travels to Brussels for the EU-U.S. summit on June 15. We believe it is in the best interest of both parties and the global economy to move past the spat and re-establish a crucial transatlantic alliance. In other words, pass the potatoes and let’s chat football.