US to impose higher tariffs on EU aircraft
On February 14th, in an effort to end a trade dispute between the EU and the US, the United States Trade Representative (USTR) decided to impose an additional 5% tax increase on the import of Airbus-made aircraft into the country. Starting March 18th 2020, this will bring the tax levied upon European aircraft to 15%, up from the 10% implemented in October last year.
This comes following a decision made on the 15-year-old dispute over subsidies for plane makers in which the US was given the right to impose counter measures on $7.5 billion worth of EU goods. EU-imported food will continue to be taxed at a rate of 25%. This food-tax may be higher than the import tax imposed on Airbus, but it certainly does not mean the manufacturer has nothing to worry about.
Airbus is said to support 275,000 American jobs, with Airbus CEO Guillaume Faury stating, "Airbus is therefore hopeful that the US and the EU will agree to find a negotiated solution before creating serious damage to the aviation industry as well as to trade relations and the global economy."
Airbus' American customers will no doubt feel the impact of this increase, but it is also likely that all purchasers of Airbus will share the bill. The travelling public could ultimately see inflated fares, paying for the damages. The air-framer has taken advantage of subsidies granted to them by the EU, allowing them to sell their aircraft at a cheaper price by affordably importing its parts and aircraft into the US market.
Will this work in Boeing's favour? Following the groundings of the 737 MAX, Boeing has seen its order form drop to levels not seen for over 50 years. The easy option for airlines not already committed to the MAX has been to go European, ordering Airbus' neo series. This levy could present US airlines with a trickier decision. If and when the MAX issues subdue, a 15% import duty may just see airlines side with the Chicago based manufacturer. Boeing could benefit, but as this dispute continues, and without a resolution in sight, Boeing could also see a tax imposed on the import of their aircraft into the EU. The WTO are expected to permit a move by the European Union to impose a similar tax on US goods in the "May/June time frame".
"If the US decides to impose WTO authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same," said the European Commission.
It is worth noting that Airbus' North American plants are, however, currently exempt from these tariffs, with plans in place for a third assembly line to be built in Mobile, Alabama soon.