EU Given Green Light to Impose Tariffs on US Products Worth $4 Billion

Earlier this month, the World Trade Organisation (“WTO”) allowed the EU to impose retaliatory tariffs worth $4 billion on imports from the United States of America. The WTO authorised these retaliatory tariffs as a countermeasure to the illegal subsidies from the US to the American aircraft maker Boeing. The EU is aiming to reach a settlement with the US before imposing additional tariffs, but is also finalising its list of US products for which additional import duties should apply in case there is no settlement. The current preliminary list already includes, among others, tobacco, suitcases and video consoles. Hong Kong traders should be aware that should the EU decide to adopt the tariffs, this could create business opportunities for exporters not located in the US who are interested in the European market, as the retaliatory measures would not apply to their imports. 

The WTO decision allowing the EU to adopt retaliatory tariffs was expected in the first half of this year but was delayed because of the Covid-19 pandemic. This decision is part of a long-lasting trade dispute between the US and the EU over illegal subsidies for the two largest plane makers in the world, Boeing and Airbus. In October 2019, the WTO allowed the US, in a parallel case, to take countermeasures against European exports worth up to $7.5 billion because of illegal EU subsidies received by the European plane maker Airbus. Subsequently, the US applied these additional tariffs, which are still in place today.

The EU is now allowed to impose counter retaliatory tariffs on US products because of US subsidies received by the US plane maker Boeing. However, Hong Kong traders should know that the EU first wants to try to reach a settlement with the US. The Commissioner for Trade at the European Commission, Valdis Dombrovskis, stated that “I would much prefer not to [retaliate] - additional duties are not in the economic interest of either side, particularly as we strive to recover from the Covid-19 recession. I have been engaging with my American counterpart, Ambassador Lighthizer, and it is my hope that the US will now drop the tariffs imposed on EU exports last year.”

The EU is likely to wait until after the US elections on 3 November 2020 to see whether a settlement is possible, because reaching a settlement with the current Trump administration is seen to be very unlikely.

However, despite primarily aiming to reach a settlement with the US, the EU is nonetheless preparing for additional tariffs on a number of US products. The EU has already created a preliminary list of US products on which additional tariffs should be applied. The EU aims to finalise this list with the Member States shortly.

Hong Kong traders may like to know that the preliminary list is already 11 pages long (please click on the above hyperlink) and includes a broad range of products such as tobacco, video game consoles, suitcases and handbags.

Further, it is also the case that some Member States are putting pressure on the EU to introduce these additional tariffs. In particular, the French Finance Minister and Trade Minister had already stated in a joint statement that “given that the US is not withdrawing their own taxes on our products, we should rebalance the balance of power and show we are firm […]. That is why the EU should impose sanctions as soon as the WTO will have formally authorised them.”

In sum, the EU can impose additional tariffs on products exported from the US, but it is more likely that the EU will wait after the US elections to see whether a settlement is possible. Should this not prove to be the case, the EU will probably go ahead and impose additional tariffs on US products. This could, in turn, lead to business opportunities for exporters not located in the US and interested in the European market, as the retaliatory measures would not apply to their imports.