The US, EU Suspend Tariffs Triggered by Airbus-Boeing Conflict

By Arvind Datta | March 8, 2021
Arvind is a recluse who prefers staying far away from the limelight as possible. Be that as it may, he keeps a close eye on what's happening and reports on it to keep people rightly informed.

The United States and the European Union have agreed upon temporarily suspending all tariffs imposed on each other as punishment for Boeing and Airbus’s subsidies. The suspension will be in effect for four months.

It will benefit $4 billion worth of American exports to the EU, including tobacco, tractors, vodka, rum, airplanes, and $7.5 billion value of EU exports to the United States, including aircraft, wine, and cheese.

The conflict regarding subsidies provided to American Boeing and EU’s Airbus existed before Trump assumed office; however, tensions grew intense under the Trump administration. 

In Oct. 2019, the WTO authorized Washington to impose tariffs on $7.5 billion worth of European imports for the support EU extended to Airbus. A year later, in Oct. 2020, the WTO authorized the EU to slap similar tariffs on $4 billion worth of American imports for the subsidies the U.S. offered Boeing. 

The tariff pause will activate as soon as internal procedures between both sides are completed. European Commission President Ursula von der Leyen said that she had spoken to President Biden by phone about the issue before the tariff suspension was decided upon. 

The White House revealed that the two leaders had discussed combating COVID-19, climate change, improving economies, strengthening the trans-Atlantic cooperation, and a host of other issues during the phone call.

European Commission Executive Vice-President and Trade Commissioner Valdis Dombrovskis stated that the two powers’ agreement marks a reset in the relationship. 

“Removing these tariffs is a win-win for both sides, at a time when the pandemic is hurting our workers and our economies. This suspension will help restore confidence and trust, and therefore give us the space to come to a comprehensive and long-lasting negotiated solution. A positive EU-U.S. trade relationship is important not only to the two sides but to global trade at large,” he said in a statement.

Removing these tariffs is a win-win for U.S and EU trade relationships. Image: pixabay/CC0.1.0

The temporary pause will come as a relief for Airbus and Boeing, struggling with weak demand caused by the pandemic. Airbus welcomed the decision and called for a long-standing settlement to prevent losses on both sides.

Katherine Tai, who is set to be the U.S. Trade Representative has stated that she is eager to resolve the two superpowers’ aircraft conflict permanently.

Airbus-Boeing Production and deliveries

The pandemic crashed the production rates of both aircraft manufacturers. The two companies were also severely hurt by cancelations of previous orders. When looking from the perspective of deliveries, 2020 was disastrous for both firms. 

It is an essential metric since the companies receive revenue for planes they manufacture only upon their delivery. Lower deliveries mean that the aircraft companies receive much lower revenues.

Last year, Airbus delivered fewer aircraft to customers than in 2012. For Boeing, delivery numbers were even worse, falling to the mid-70s level. When it came to ordering cancelations, Boeing had more of it than new orders. There was not a single month last year when Boeing’s new orders exceeded cancellations. Airbus also did not fare well and had to deal with large cancelations.

Fortunately for Airbus, its upcoming long-distance single-aisle model A321XLR scheduled for 2023 is proving to be a hit among customers, even affecting larger planes’ orders. As for Boeing, the company does not seem to have an answer, at present, to the Airbus model. 

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