How does the WTO ruling on Airbus mean for manufacturing?

An Airbus A350. Regis Duvignau Reuters  file

The US has been given the green light by the World Trade Organization to impose tariffs on $7.5bn (£6.1bn) of European Union goods.

The US spared cognac and champagne from the list but announced tariffs of 25% on goods including French wine, Italian and Dutch cheese and Spanish ham.

It clears the way for the Donald Trump administration to impose counter-measures on the 28-member bloc and follows a WTO ruling in May 2018 on the Airbus subsidies.

"The WTO has been much better to us since I've been president because they understand they can't get away with what they've been getting away with for so many years, which is ripping off the United States", Trump said at a joint White House news conference with President Sauli Niinisto of Finland.

Stock markets around the world, which were already down on concerns for the world economy, added to their losses on the news.

But the aircraft tariffs would not apply to aircraft parts, sparing Airbus assembly operations in Alabama from higher costs, as well as shielding European parts used by USA plane maker Boeing Co. "Despite the fact that this dispute is about aircraft subsidies, our sector has been hit hard".

It said that Washington's tariffs on aircraft or aircraft parts would raise the cost of acquiring new aircraft for both American and European airlines, and create insecurity and disruption to the aerospace industry and the broader global economy. Overall, the USA tariff list "represents a light touch and we would expect positive reaction for European spirits companies", Jefferies analyst Edward Mundy wrote in a note.

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"Imposing tariffs on aircraft that United States companies have already committed to will inflict serious harm on U.S. airlines, the millions of Americans they employ and the traveling public".

The two cases are expected to lead to tit-for-tat tariffs, beginning with the USA measures, posing new problems for businesses and financial markets around the world. President Trump nevertheless declared the ruling a vindication for the U.S.

The WTO says the US retaliation can take the form of a suspension of tariff concessions and other elements of trade agreements.

In contrast, the U.S. has taken no steps to bring its support to Boeing into compliance with WTO law.

The surprise decision to omit imported aircraft sections came in a list of tariffs that was smaller in percentage terms and in scope than initially signalled by Washington. While Airbus has had a setback in its failure to turn its A380 "super jumbo" into the world's long-haul of choice, Boeing has recently has a blowout with its 737 Max planes.

The US is set to enforce US$7.5 billion of tariffs on exports from the European Union, including Scotch whisky and liqueurs, over an ongoing dispute with the World Trade Organization (WTO). This limits options for airlines looking to expand their fleets to accommodate increased air travel.

The exchange echoes how the USA and China ratcheted up a tariffs fight in recent months that has bruised businesses around the world and stunted economic growth. At the time, it released a list of "89 tariff subheadings with an approximate trade value of $4 billion" for public comment. And at least one tariff expert believes the decision may have ultimately saved Mobile's Airbus plant from potential closure.

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