As the United States approaches the end of its protracted trade war with China, it looks like the EU could be the next target for trade tariffs balancing. According to the office of the United States Trade Representative, there are up to $11.2 billion worth of tariffs ready to be applied to European goods coming into America.
The U.S. has accused the EU of unfairly subsidizing its industries to hinder competition.
Airbus at the Center of the Threat
Trade tariffs representatives from both sides of the Atlantic have been negotiating new trade terms since last year. President Trump is eager to balance trade deficits that exist with Europe. Trump said on Tuesday this week that “The EU has taken advantage of the U.S. on trade for many years. It will soon stop!”
Airbus is at the center of the latest news. The World Trade Organization (WTO) ruled in 2018 that the EU had illegally paid $22 billion in state aid to Airbus, helping it to develop and launch its A380 and A350 aircraft. Government funding broke WTO rules and was detrimental to the sales of US competitor, Boeing (NYSE: BA).
The office of the U.S. Trade Representative has stated that subsidizing Airbus has led to “adverse effects” on America’s aerospace companies. Boeing and Airbus are fierce rivals and are the world’s two largest aerospace companies.
The U.S. won’t just place tariffs on aircraft and equipment. Heavy duties will extend to cheese, olives, wine, motorcycles, and other key European exports.
The EU, which has also accused the U.S. of subsidizing Boeing, has stated that it is ready to hit back with its own tariffs. A representative said this week that the U.S. had “greatly exaggerated” its losses, and that there would be “far larger countermeasures against the U.S.”
Will Stock Markets Be Affected?
The trade tariffs announcement put an end to an impressive growth run on the S&P 500 (SPX). The index declined -0.61% after the news was made public on Tuesday. The NASDAQ Composite (COMP) also fell on Tuesday, closing the day at -0.56%.
Tariffs could be introduced in the coming days if negotiators fail to reach any alternative agreement. The tariffs are much less significant than the $200 billion imposed on China, but investors are still weary of seeing another extended trade war.
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