Donald Trump slams EU subsidies for Airbus on Twitter, threatens $11B in tariffs

Click to play video: 'What is a trade war? How do tariffs work?  And why it will impact Canadian consumers'
What is a trade war? How do tariffs work?  And why it will impact Canadian consumers
WATCH: What is a trade war and how do tariffs work? – Jul 21, 2018

The United States wants to put tariffs on $11.2 billion worth of EU goods — from airplanes to Gouda cheese to olives — to offset what it says are unfair European subsidies for plane manufacturer Airbus.

U.S. President Donald Trump reiterated the intent with a tweet Tuesday morning, claiming the EU took advantage of the U.S.

“The World Trade Organization finds that the European Union subsidies to Airbus has adversely impacted the United States, which will now put Tariffs on $11 Billion of EU products!” he wrote on Twitter.

The E.U. has begun preparations for retaliation, an E.U. official told Reuters Tuesday. Airbus told Reuters it saw no legal basis for the U.S. move and warned of deepening transatlantic trade tensions.

While the size of the tariffs is small compared with the hundreds of billions the U.S. and China are taxing in their trade war, it suggests a breakdown in talks with the European Union over trade at a time when the economy is already slowing sharply. The U.S. and EU have been negotiating since last year about how to avoid tariffs that President Donald Trump has wanted to impose to reduce a trade deficit with countries like Germany.

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The U.S. Trade Representative’s office released late Monday a list of EU products it would tax in anticipation of a ruling by the World Trade Organization this summer.

The U.S. had in 2004 complained to the WTO, which sets the rules for trade and settles disputes, that the EU was providing unfair support to Airbus. The WTO ruled in May last year that the EU had in fact provided some illegal subsidies to Airbus, hurting U.S. manufacturer Boeing.

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WATCH: Trump says EU treats U.S. ‘very unfairly,’ will tariff products if unwilling to talk (March, 2019) 

Click to play video: 'Trump says EU treats U.S. ‘very unfairly,’ will tariff products if unwilling to talk'
Trump says EU treats U.S. ‘very unfairly,’ will tariff products if unwilling to talk

The U.S. expects the WTO will say this summer that it can take countermeasures to offset the EU subsidies. It will now start a consultation with industry representatives on the list of EU goods it wants to tax so that it can have a ready list.

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“This case has been in litigation for 14 years, and the time has come for action,” said U.S. Trade Representative Robert Lighthizer.

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The move, while nominally following international trade rules, appears to also reflect U.S. frustration at the slow pace of talks on trade with the EU.

Trump in June last year imposed tariffs of 25% on steel imports and 10% on imported aluminum from the EU. The EU responded with tariffs on about 2.8 billion euros’ worth ($3.4 billion) of U.S. steel, agricultural and other products, from Harley Davidson bikes to orange juice.

The U.S. and EU have since July been in talks to scale back the tariffs, with Trump holding out the bigger threat of slapping tariffs on European cars – a huge industry in the region – should the negotiations not yield a result. U.S. officials have repeatedly expressed frustration at the slow pace of the talks.

The U.S. announcement also comes just as Boeing is facing broad challenges over the global grounding of its 737 Max commercial jet amid concerns that technical problems could have contributed to two crashes in five months. In a separate case, the WTO has also ruled that Boeing got a small amount of illegal support from the state of Washington worth some $100 million a year.

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Tariffs on European airplanes could in theory help Boeing and hurt Airbus, whose shares were down 1.5 per cent on Tuesday on a day when stock markets were trading higher.

The U.S. announcement also comes as China’s prime minister meets top European Union officials to discuss thorny issues, including trade.

*With files from Global News and Reuters 

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