WTO gives EU $4 billion target on US goods in Boeing case

The European Union can impose tariffs on about $4 billion of U.S. exports annually in retaliation for government aid to Boeing Co. deemed illegal by the World Trade Organization, according to people familiar with the ruling.

The WTO decision, released privately to EU and U.S. officials, is one-third of the EU’s request for a $12 billion award and lower than the $7.5 billion retaliation judgment the WTO granted the U.S. last year in a parallel dispute against Boeing’s European rival, Airbus SE. The trade body’s decision will be published in coming weeks, the people said.

The ruling, reported earlier by Reuters, marks a key milestone in the WTO’s longest-running dispute that could create momentum for an aircraft settlement accord or boil over in a tit-for-tat transatlantic trade war.

By awarding so much less to the EU than the U.S. won, the decision gives Washington some leverage in any negotiations to resolve the case. Airbus shares fell 1.8% to 61.47 euros as of 10:30 a.m. in Paris. The stock is down 53% this year.

The main question now is whether the EU will act quickly to impose tariffs—a move that could mean new or higher import taxes on American exports to Europe ahead of the U.S. presidential election Nov. 3 and in the midst of global economic turmoil tied to the pandemic.

Airbus and Boeing declined to comment, saying the WTO report is currently confidential. The U.S. Trade Representative didn’t immediately respond to a request for comment.

The long-running feud between the airplane manufacturing giants is one of several sources of friction in the trade relationship between the EU and the U.S.

Testifying to Congress on June 17, U.S. Trade Representative Robert Lighthizer signaled a renewed willingness to use tariffs on the EU, which had a $179 billion surplus in goods trade with the world’s largest economy last year—more than double the level a decade ago. He has also called the WTO a “mess” that operates counter to America’s commercial interests.

President Donald Trump has raised the prospect of putting tariffs on European autos to rebalance the transatlantic relationship—a threat to a key industry already struggling during the Covid-19 pandemic and the risks of recessions stretching from Germany to Mexico.

The decision comes as the world’s two biggest planemakers battle with the unprecedented slowdown ushered in by the coronavirus. Both have seen demand for their aircraft plummet and Airbus has cut its monthly output by a third, while Boeing plans to cut more than 10% of its workforce.

The pandemic could lead the two to decide the last thing they need is a global trade war and move to resolve the standoff.

Airbus Chief Executive Officer Guillaume Faury said in June that he hoped the European sanctions would bring Boeing to the negotiating table, through causing “a level of pain for both sides that is similar so no party has an interest to stay in that situation.”

The WTO arbiter said the EU was permitted to retaliate because the U.S. had provided illegal subsidies to Boeing through a tax cut in Washington state that disadvantaged sales of Airbus commercial aircraft.

Washington’s legislature repealed its preferential tax arrangement in March, and Lighthizer has previously said the EU had “no valid basis” to retaliate because the U.S. “has fully implemented the WTO’s recommendation, ending this dispute.”

The WTO’s decision is one of the final hurdles before the EU can officially announce which American products it will target with tariffs. The EU is expected to announce retaliatory duties of as much as 100% on a list of American goods that includes airplanes, helicopters, tractors, tobacco, rum, wine, and orange juice.