The US has imposed a 10% customs levy on aircraft made in the European Union, effective October 18, which could hurt airlines in the United States that have ordered billions of dollars of Airbus (AIB, Toulouse Blagnac) aircraft.
The new tax is part of USD7.5 billion worth of tariffs announced on October 2, with a 25% tax heaped on exports from the EU on everything from French wine to Italian salami. This is all in retaliation for subsidies allegedly given to Airbus in a dispute that goes back 15 years.
The list of affected products subject to additional import duties of 10% specifies: “New airplanes and other aircraft (other than military airplanes or other military aircraft) of an unladen weight exceeding 30,000kg.”
The move came after the US was given authorisation from the World Trade Organisation (WTO), which has the authority globally to set rulings on trade disputes, the Guardian newspaper reported. The EU has responded that it now has no choice but to retaliate itself. In spring 2020, the WTO is preparing to rule on what tariffs the EU can impose due to US state aid given to Boeing (BOE, Washington National).
Implemented by the Trump administration, the case nevertheless goes back to 2004 when the US alleged that Airbus illegally received loans on preferential terms and billions of euros in grants from EU countries for the development of the A380 and the A350. The WTO gave a mixed verdict in 2010 and years of appeals followed.
Airbus has argued that tariffs on aircraft will bring further insecurity to airlines and to the wider global economy and urged a negotiated settlement.
“Airbus will continue working with its US partners, customers, and suppliers to address all potential consequences of such tariffs that would be a barrier against free trade and would have a negative impact on not only the US airlines but also US jobs, suppliers, and air travellers,” said Guillaume Faury, the manufacturer's chief executive. “Airbus is therefore hopeful that the US and the EU will agree to find a negotiated solution before creating serious damage to the aviation industry as well as to trade relations and the global economy.”
Delta Air Lines (DL, Atlanta Hartsfield Jackson) has around 170 Airbus aircraft on order, the cost of which could increase.
“Aircraft are significant purchases requiring long lead times for production - often years in advance,” the carrier said in a statement. “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 travelling public.”
According to the newspaper Le Monde, Airbus has already proved it has abandoned most of the subsidies that have been denounced by the US. Only 6% of its production, mainly the A350 and A380, still benefit, and Airbus has announced it will stop production of the latter in 2021.
