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US considering $4bn more tariffs on EU: fallout from Airbus subsidies, or revenge for INSTEX?

US considering $4bn more tariffs on EU: fallout from Airbus subsidies, or revenge for INSTEX?
The US is eyeing tariffs on $4 billion more in European products, citing vague “additional analysis” ostensibly in a row over aircraft subsidies. The decision comes days after the EU restarted trade in essential goods with Iran.

The US trade representative has released a list of 89 categories of goods featuring an array of European foods and liquor to be added to April’s compendium of products subject to proposed import duties, which is already worth some $21 billion, claiming the additional tariffs are “in response to public comments and following initial analysis.” 

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Frozen pig meat, fermented and curdled milk products, Gouda, Edam, and an array of Italian cheeses, olives, coffee, pasta, whisky, certain chemicals and metals appear on the USTR's list of additional products. A public hearing will be held in August to discuss the measures. 

April’s tariffs were ostensibly floated in response to the World Trade Organization’s ruling that EU subsidies to aircraft manufacturer Airbus had “adverse effects” on the US, though the EU has claimed US subsidies to competitor Boeing are just as damaging and threatened to retaliate with tariffs of its own. Boeing, whose bestselling 737 MAX jet has been grounded worldwide since March after two deadly crashes within six months, has bigger problems right now than EU subsidies, however. A Justice Department probe into the 737 MAX’s certification has expanded to ensnare the 787 Dreamliner, and Boeing’s sales cratered while legal experts suggested the company could be held liable for putting profits before safety, cutting corners to churn out planes quickly enough to beat Airbus to market. 

The USTR's new tariff proposal, meanwhile, comes less than four days after the official launch of the Instrument in Support of Exchange (INSTEX), a “special purpose vehicle” devised by Germany, the UK and France in order to bypass the SWIFT system of international payments and trade food and medicine with Iran, debuted on Friday despite howls of recrimination from the US, which has threatened Europe with sanctions should it defy Washington on this. While these humanitarian goods are supposedly exempt from sanctions, the US has let it slip before that its restrictions are designed to inflict maximum suffering on the Iranian people – “The leadership has to make a decision that they want their people to eat,” as Secretary of State Mike Pompeo memorably put it last year – and many pharmaceutical and agricultural companies cut off trade with Iran anyway out of fear of sanctions.

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The US initiated the European trade war last June, slapping tariffs on European steel and aluminum in a move the EU claimed violated global trade rules. Europe imposed duties on $3.4 billion in American foods and beverages in return. Sanctioning Europe may be a non-starter, but the Trump administration could be banking on a repeat of its recent success in using tariffs – and the threat of tariffs – to influence allies’ behavior. Threatening Mexico with tariffs led the country to crack down on illegal border crossings, while threatening to withhold foreign aid elicited similar cooperation from the governments of Guatemala and Honduras. The ongoing trade war with China, however – which dwarfs any proposed tariffs against the EU – has been less of a “win” for Trump.

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