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US Threatens EU With Tariffs Over Aircraft Subsidies; Retaliation Expected

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US Threatens EU With Tariffs Over Aircraft Subsidies; Retaliation Expected

The Trump administration is threatening to target $11 billion in European goods with tariffs as part of a spat over subsidies for the world’s two biggest aircraft makers, escalating an American trade war on a second continent.

What Happened

The U.S. is threatening the tariffs in response to Europe’s subsidizing of Airbus SE (OTC: EADSY), an accusation backed by the World Trade Organization. The EU says if the U.S. presses forward with tariffs over the issue, it could pursue its own tariffs over U.S. subsidies to Boeing Co. (NYSE: BA).

What It Means

The threats escalate trade tensions on another front for the U.S., though the dollar amount involved is a tiny fraction of the $360 billion in tariffs the U.S. and China have on each other’s goods.

The expanding trade war talk is worrying investors in companies with a large international market presence — and spurring fears of exacerbating an economic slowdown in Europe. 

The list of targets for U.S. duties is long, including foods ranging from cheese and wine to yogurt, butter, seafood and olive oil. It also includes non-military helicpopters and airplanes, some motorcycles and clothing, clocks, glassware, textiles, carpets and other goods.  

Reports from Europe recounted emerging concerns among large exporters about the possibility of an ongoing expansion of the trade dispute that could widen it more to cover items not currently on the list.

Reuters reported rising concerns among automakers, particularly in Germany, where Volkswagen AG (OTC: VWAGY), Daimler AG (OTC: DMLRY) and Bayerische Moto/S ADR (OTC: BMWYY) all count the United States as a major market. All saw their share prices drop Tuesday, even though autos aren't presently included. 

Brussels To Respond

The EU hasn't said which American goods it might target in retaliation, though Airbus said in a statement that the EU would take “far larger countermeasures against the U.S.”

U.S. goods and services trade with the EU totaled nearly $1.1 trillion in 2016, according to the U.S. Trade Representative's office. U.S. exports to the EU totaled $501 billion, while imports were just under $600 billion. 

The top categories for U.S. exports to Europe are aircraft, machinery, pharmaceuticals and instruments and machinery.

The Trump administration and EU already have waged trade battles, with the U.S. imposing tariffs on European steel and aluminum last year and the EU retaliationg with a tariff on various U.S. manufactured goods. Trump at the time also threatened European automakers.

Price Action 

Shares of Toulouse, France-based Airbus were down 1.19% at $33.57 at the time of publication Tuesday. Shares of Boeing were down 1.39% at $369.50.

Volkswagen shares were down nearly 0.87% to $17.15, while Daimler was down 0.93% to $15.53.

Shares of some American automakers were also down, including Ford Motor Company (NYSE: F), which dropped 0.91% to $9.22, and General Motors Company (NYSE: GM), which was down 0.27% to $38.94.

Related Links:

Will EUR/USD Tumble On New Tariffs From Trump?

Trump Threatens 20% Tariffs On EU Cars

Posted-In: Reuters tariffs Trade World Trade OrganizationGovernment News Global Media Best of Benzinga

 

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