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Airbus: Trump Tariffs on WTO Ruling Would Cost US Jobs

Airbus: Trump Tariffs on WTO Ruling Would Cost US Jobs
(Mohamed Ahmed Soliman | Dreamstime)

Wednesday, 02 October 2019 03:35 PM

Airbus SE said American jobs will be threatened if President Donald Trump hits its planes and parts with tariffs after the World Trade Organization authorized $7.5 billion in duties against the European Union.

The annual levies “would be a barrier against free trade and would have a negative impact on not only U.S. airlines but also U.S. jobs, suppliers and air travelers,” Chief Executive Officer Guillaume Faury said in a statement, adding that they’d create “insecurity and disruption” across the aerospace industry.

Two-fifths of the components that make up an average Airbus jet come from the U.S., according to the European planemaker. That helps support 275,000 jobs in 40 states through spending that’s totaled $50 billion in the past three years, with the company aiming to double that amount over the next decade.

Airbus has also been delivering A320 single-aisle jets from a final assembly line in Mobile, Alabama, since 2016 and added the A220 model in August. The Mobile site separately designs cabins and cargo systems for the entire aircraft range, while a facility in Wichita, Kansas, specializes in engineering design.

While the U.S. has yet to say which parts of the European economy will be hit with so-called countermeasures, the high cost of commercial aircraft means the aerospace industry is especially vulnerable to any effective price hike.

“A 10% tariff on a bottle of wine may not deter the Bordeaux aficionado, but the same for an Airbus plane may lead a U.S. airline to defer delivery,” said Sandy Morris, an analyst at Jefferies in London.

Of the two manufacturers, Airbus has the greatest exposure to potential levies, with almost 900 unfilled orders from U.S. customers at the end of August, compared with Boeing’s EU backlog of close to 600 jets.

The WTO announcement on potential levies against the EU over illegal state funding for Airbus planes marks the latest chapter in the body’s longest-running dispute and will further test trans-Atlantic relations that have deteriorated under Trump’s “America First” strategy.

Airbus closed 1.7% lower in Paris, while Boeing Co. fell as much as 3% in New York amid reports that an employee filed an internal complaint relating to the rejection of a safety system that could have reduced risks that led to fatal crashes involving the 737 Max jet.

Toulouse, France-based Airbus urged the U.S. to take account of a looming WTO decision on a parallel case regarding the size of tariffs Europe can impose over subsidies paid to Boeing, saying they could exceed the value of the U.S. sanctions and repeating calls for a negotiated settlement.

Tit-for-Tat

European Trade Commissioner Cecilia Malmstrom said in a statement that the bloc shared “concrete proposals” for a new regime on aircraft subsidies and a way forward for existing compliance obligations as recently as July, but that the U.S. has not so far reacted.

Malmstrom added that Europe will follow suit if the U.S. imposes countermeasures, while warning that a tit-for-tat escalation will harm global trade and the broader aviation industry, and that a “fair and balanced solution” must be sought.

U.S. carriers have also pushed back against the anticipated levies, with trade group Airlines for America saying tariffs on aircraft would be “unprecedented” and negatively impact both the country’s aviation industry and economy.

Boeing said Airbus and other European businesses face tariffs because its rival refused for years to conform with WTO rulings. Its said its not to late to avoid the levies if the company comes into “full compliance with its obligations.”

Whiskey, Ketchup

The WTO award is lower than the Trump administration’s request to impose tariffs on $11.2 billion of European exports. The U.S. hasn’t announced which goods it will hit, but stated targets include whiskey, motorcycles, leather handbags, cheese and wine, as well as planes.

The EU has published a preliminary list of U.S. items it plans to target in a $12 billion plan for retaliatory levies, spanning ketchup to video-game consoles. The Geneva-based WTO is expected to announce the actual sum that can be imposed some time in the first half of next year.

The bloc could seek to hit back before then by reviving a 2002 WTO ruling allowing it to impose tariffs on more than $4 billion of U.S. exports, according to people familiar with the plan. The issue concerned a tax scheme that provided American companies with an unfair advantage, though it was considered to be settled in 2006 when lawmakers repealed the measures.

© Copyright 2019 Bloomberg News. All rights reserved.

   
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Airbus SE said American jobs will be threatened if President Donald Trump hits its planes and parts with tariffs after the World Trade Organization authorized $7.5 billion in duties against the European Union.
airbus, trump, tariffs, us, jobs, wto
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2019-35-02
Wednesday, 02 October 2019 03:35 PM
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