US-EU Trade War Last Thing World Needs, Says WTO

Donald Trump
U.S. President Donald Trump arrives at the White House (Photo: Reuters / Tom Brenner)

A trade war between the European Union and the United States should be avoided and is "the last thing we need," according to Roberto Carvalho de Azevêdo, director-general of the World Trade Organization (WTO).

Speaking a week after the WTO ruled in favor of the U.S. in a case involving illegal EU subsidies to aircraft maker Airbus S.E., Azevêdo said both the EU and the U.S. should negotiate an agreement over government subsidies to Airbus and The Boeing Company.

"I hope parties will sit down and talk and find a negotiated solution because the last thing we need at this point in time is an escalation of tariff barriers and trade restrictions," said Azevêdo.

He said the EU and the U.S. levying tariffs on imports will tend to generate a "domino effect" of barriers to trade.

"You cannot expect that you can impose tariffs and barriers and everyone else is going to sit down and applaud quietly. They are going to respond," he correctly pointed out.

The Trump administration, however, seems intent on imposing punishing tariffs on the EU. President Donald Trump gloated over this possibility only a few hours after the WTO ruling against the EU was revealed on Oct. 3.

"The U.S. won a $7.5 Billion award from the World Trade Organization against the European Union, who has for many years treated the USA very badly on Trade due to Tariffs, Trade Barriers, and more. This case going on for years, a nice victory!" tweeted Trump.

Despite Trump's known desire to punish the EU with heavy tariffs, both the EU and the U.S. will hold trade talks on Oct. 14 to find a way out of this mess. It's also unclear if this meeting will convince Trump to delay the new tariffs, which will take effect on Oct. 18.

When it filed the case against the EU in 2004, the U.S. demanded compensation for what it said were illegal subsidies granted by European governments to Airbus, which is the world's second-largest maker of commercial aircraft after Boeing.

The WTO decision favoring the U.S. will allow the U.S. to levy billions of dollars in tariffs on a range of EU exports. Analysts concur the new U.S. tariffs -- when implemented -- will spark a new trade war the world doesn't need right now. A global recession is looming on the horizon as a result of the trade war launched by Trump against China 16 months ago.

On Oct. 2 after the WTO ruling, the Office of the U.S. Trade Representative (USTR) confirmed the U.S. will impose tariffs on EU products. USTR will add a 10 percent tariff on EU aircraft and a 25 percent tariff on agricultural and other products.

In April, USTR published a list of potential tariff targets worth a total of $25 billion. It also requested permission from the WTO to introduce 100 percent tariffs on European products worth $11.2 billion.

Arbitrators will determine if that amount is proportionate and reasonable, or whether it should be lower, as the Europeans have requested.

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