The World Trade Organisation handed down one of its largest penalties ever late Tuesday, after allowing the European Union to impose tariffs on American goods worth up to €3.4 billion total.
The ruling in favour of the EU is another chapter in a longstanding conflict between Brussels and Washington, in which both parties have accused each other of providing illegal state aid to their own aircraft manufacturers.
Tariffs are government taxes that can be added to goods imported from other countries. Tariffs serve as sanctions, because they make it more expensive and thus less attractive to import certain products from targeted countries.
In 2019, the WTO found that the US government had granted at least €4.3 billion ($5 billion) in subsidies to American Boeing. These subsidies were deemed illegal under international trade laws. The EU argued this practice resulted in unfair competition for European aircraft manufacturer Airbus, with which the WTO agreed.
Preceding the 2020 WTO ruling in the EU’s favour, the WTO concluded in 2019 that the US was allowed to impose tariffs on the EU for providing subsidies to Airbus in violation of international trade laws.
The WTO ruling in favour of the US was the result of 15 years of legal proceedings against the EU. The US argued that the aid the EU had provided to Airbus had led to “significant lost sales of Boeing large civil aircraft”.
The US subsequently imposed tariffs on EU goods worth €6.4 billion ($7.5 billion). This sanction was the largest to ever be approved by the WTO.
The EU has already been considering a list of American products to impose tariffs on following the WTO ruling. Options include dried fruit, frozen fish, rum, vodka, tobacco, handbags, tractors and motorcycle parts.
In the past, the EU has sought to match European products that have been affected by tariffs with products from other countries. For example, the EU may target US cheese manufacturers in response to US tariffs on Dutch Gouda cheese.
The Brussels Times