Trump proposes tariffs on Airbus; EU likely to retaliate against Boeing

April 9, 2019, © Leeham News: The European Union is likely to seek stiff tariffs against Boeing and other US exports in retaliation for the Trump Administration’s announcement yesterday it proposes $11bn in tariffs against Airbus and European exports.

The Trump tariffs are proposed in connection with a World Trade Organization appeals finding that Airbus failed to cure illegal subsidies for the A380 and A350.

Last month, the same WTO appeals process found Boeing and the US failed to cure illegal tax breaks to Boeing. Airbus claims at least $15bn in harm from these in lost sales.

Neither the US nor the EU may impose the tariffs in advance of yet another round of WTO proceedings. The disputes already have gone on for 15 years.

Taxing wings, fuselages and components

The Trump tariff list, here, proposes taxing not only Airbus airplanes and helicopters not used for military and Coast Guard purposes but also components, wings, fuselages and other structures that Airbus imports into the US for its Mobile (AL) A320 final assembly line.

The list lumps the United Kingdom in with other EU states, France, Germany and Spain. The UK’s Wales is a major wing producer for Airbus. Northern Ireland, which is part of the UK, produces wings for the A220. It’s not clear if these would be included, and the UK’s looming exit from the EU clouds the issue. E the violations occurred during UK’s membership in the EU, would tariffs be levied on its goods and components or not?

Retaliation

Airbus immediately responded to the Trump tariff plan by saying the EU will retaliate.

Boeing doesn’t assemble airplanes in Europe but it has a major customer base for its 7-Series airplanes. Ryanair is a huge 737 customer, with a major outstanding order for the 737 MAX 200. Lufthansa Airlines is a launch customer for the 777-9; first deliveries are due next year.

 

65 Comments on “Trump proposes tariffs on Airbus; EU likely to retaliate against Boeing

  1. So much for my view is that it is all huff and puff. Anybody think it will really happen, from either side?

    • Unfortunately I do believe that President Trump will follow through on this. He loves “Trade Wars” and thinks they are easy to win.

  2. In practice, that would mean that delivery of Airbus aircraft to US airlines would come to a halt for 1 1/2 years. After that, Trump is out of the White House, hopefully.

    Of course the EU would retaliate, meaning Boeing can’t deliver aircraft to EU airlines, due to high import taxes. If the EU would like to really hurt Boeing and the US, certification of the 777X would be put on pause. Almost all coming 777X operators, including the ME3, Lufthansa, British Airways, Singapore Airlines plan to fly their aircraft to the EU or thru EU airspace.

    The big question is what happens to the Canadian A220.

    • A220s built in Canada would not be affected as the tariffs are only aimed at the EU.

      • Then there is Alabama.

        Can you imagine how pissed those Republican representatives are?

        Its enough to make me rue that we did not get the A330MRT.

  3. Don’t worry. Trump fails at everything he does. There will be no tariffs, or if there are they will be short lived. Just like his renegotiation of NAFTA, he’ll make no substantive changes but declare victory.

    Trump does stuff like this for attention and to gin up his dim-witted base, who confuse talk and Tweets with action.

  4. I doubt if they will ga after BA. Washington isn’t Trumps power base. It will be farmers and car makers who wind up paying for this.

    • Farm stuff goes to Asia and nobody in the EU is dumb enough to buy US designed and produced cars ( Tesla is too low quality to have a good standing )

      • Never mind that Ford has long been the number one car brand in Europe?

        • Ford 6.4% market share in EU in 2018, making them the #6 manufacturer (behind VW, PSA, Renault, FCA, Hyundai-Kia and BMW).

          And almost none of those are made in the US.

        • Coming from Cologne, Germany (European HQ of Ford), may I chip in here:

          Most cars Ford sells in Europe are designed in Europe and usually manufactured in Europe (some come from Turkey and Russia, both in fact partly European, too). Only a marginal fraction is coming from the US. To give you an idea, even the Mustang was not officially available for many years through Ford’s own dealerships. It had to be bought in the US and then imported through specialist companies. There are basically not US Models on sale in Europe, the only ones being the Mustang and the GT. The current Ranger, the only other US car, is designed by Ford Australia if I am not mistaken. Not sure where the Rangers sold in Europe are assembled.

          So bottom-line: Yes, Ford has been successful in Europe for many years, but basically because of its own European Ops and designs, sometimes building on US-developed Tech of course, not because of US imports.

          • ” sometimes building on US-developed Tech of course, ”

            usually the reverse. forex the GM design center used to be in Germany afaik.
            unsurprising. the best selling us type of vehicle is more or less a 1930ties pick up with “seasonal” bodywork enhancements protected by chicken tax.

          • @Uwe,

            2006-2011 Ranger was indeed based on Mazda mechanicals. Current one was developed by Ford Australia.

        • These vehicles are produced by Ford in Europe and not in the US.

        • The majority of US made car exports sold in Europe are made by BMW and Mercedes !
          Some Japanese models from US production are also sold in Europe.
          The ‘traditional US brand’ with most market share in Europe would likely be Jeep.

          • I’ve been told that the new Jeep sold here is the FIAT 500X with a kit bash bodywork. 🙂

          • The Grand Cherokee platform was used for SUV for Mercedes that is made in US.
            When I was involved with GM they had design centres in Warren Michigan, South Korea, Melbourne and Russelheim Germany. Nowdays China would be added to that and Melbourne is closed and Russelheim has gone to PSA

          • Jeep renegade ~= FIAT 500X
            Merc SUV: W163 -> design through -> W167
            W166 apparently was the Chrysler out take when Daimler Chrysler split.

          • BMW X-1 is made on the same platform as the Mini-Cooper Countryman.

      • From Lightizer’s USTR web site:

        The top export categories (2-digit HS) in 2016 were: Aircraft ($38.5 billion), Machinery ($29.4 billion), Pharmaceutical Products ($26.4 billion), Optic and Medical Instruments ($25.6 billion), and Electrical Machinery ($20.8 billion).

        U.S. domestic exports of agricultural products to the EU totaled $11.5 billion in 2016 (total exports of $11.8 billion). The EU countries together would rank 4th as an Ag Export Market for the United States. Leading categories include: tree nuts ($2.6 billion), soybeans ($1.9 billion), wine and beer ($756 million), and prepared food ($579 million).

        • Tree nuts ($2.6bill) ??
          Doesnt that really mean peanuts, cant imagine what other ‘nuts’ the US grows as commodity products

  5. Whatever the Trump Administration is doing in order to trump-up Boeing won’t help changing the facts on the ground. The grounding of the seriously FUBARed MAX now appears to be turning into an existential threat to Boeing’s worldwide competitiveness in the single aisle market. With the increasing possibility of both a significant number of non-U.S. airlines being on the cusp of abandoning the MAX altogether and an increasing number of airline travelers worldwide choosing not to fly on any MAX aircraft in the future, any increase in the cost of an A32Xneo delivered into the U.S. market is only going be passed on to the American consumer.

    If American airline travelers in increasing numbers will refuse to fly on any MAX aircraft, going forward, I’m not sure if American airlines that don’t have any A32Xneo aircraft in their fleets (or on order) and which are operators of older 737s and the 737 MAX, would be content with being forced to compete their 737 NGs — that are getting older, day by day — against competing U.S. airlines that are using an increasing number of new A32Xneo aircraft on domestic U.S. routes.

  6. Trade action only applies to (primarily) aluminium wings so the A220’s composite wings would not be affected.

    My guess is that if they do push forward with this, it will end up in the courts anyway.

  7. Sure, let’s have another pop at tariffs in the aerospace indu… Because the last time around did BA such a massive favour (C-Series anyone?)!

  8. Trump seems rather dug in about trying to trigger (or accelerate) a global economic slowdown, or even a recession.
    Both major airframers have used subsidies, as did Bombardier. I don’t doubt that Embraer, Mitsubishi, etc, get govt assistance.
    That seems to be the nature of capital-intensive, national (or economic bloc in the case of AB) prestige industry.
    Slapping massive costs onto airliners will just tank sales, without substantively rebalancing trade against subsidy ($11Bn here, $14Bn there, but at what times and to what effects?).
    At a time when the business cycle seems ‘mature’ as brokers might euphemise, this is risky (or vain … or both).

    • Good point: “Trump seems rather dug in about trying to trigger (or accelerate) a global economic slowdown, or even a recession.”

      Also agree, that in one way or another all the bigger manufactureres got support. I bet even VIKING got some tax breaks for restarting production in Canada.
      But that all doesnt matter. Because the playing field is not level. While Airbus and Boeing get somewhat hidden support (tax-breaks, low-interest loans etc), in China and Russia the Companies are state owned! Should they ever be successfull, how is that gonna go down? WTO? China already doesn’t care!

      So stop this nonsense (15 years ffs!) now. By the time it is decided and will hurt either AB or BA, the will have to compete with fully state-funded actors from Russia and/or China. Nobody is gonna even allow or care for a WTO case then….

    • Airbus has the option to set up A320 fuselage and wing manufacturing facilities in Mobile — and thereby circumventing most of the Trump tariffs on single aisle aircraft.

      • Their production system is ( mostly) single source for the manufacturing side, just the final assembly lines are in various places.
        Complete fuselage and wing manufacture of A350 is out of the question in US.
        Spirit does build some sub assemblies like wing spars in US for the A350

        Just last month Spirit bought a Belgium based company : ‘Asco unit makes flap and slat mechanisms and support structures, landing gear sub-assemblies and fuselage structural components. Its products are on Airbus A320s, Airbus A350s and Lockheed Martin F-35 fighters.”

        • I was talking about the A320 and not the A350.

          Now, wings for the A320 FAL in Tianjin have long since been manufactured in China. Hence, I can’t see why Airbus wouldn’t be able to manufacture wings and fuselage sections for the A32Xneo in Mobile — primarily in order to circumvent most, if not all of the retaliatory tariffs the USTR wants to hit the company with.

          06 AUGUST, 2014

          China’s Xian Aircraft Industry is now sole supplier of wings to Airbus’s A320 final assembly line in Tianjin.

          Sharing of expertise from Airbus’s UK wing factory, in Broughton, has facilitated the build-up of A319/A320 wing production capability for A319s and A320s at the AVIC subsidiary.

          After starting with system installation on UK-made wings in 2009, Xian Aircraft progressed to producing certain wing structures. The components were shipped to Broughton for integration with the remaining structure and then ferried back to China for system installation and final aircraft assembly. Later, Xian Aircraft began manufacturing entire wing boxes.

          “Since this summer, all wings for the FAL (final assembly line) in Tianjin are supplied by XAIC,” says Airbus.

          https://www.flightglobal.com/news/articles/xian-aircraft-becomes-sole-wing-supplier-for-airbus39s-tianjin-402426/

          • @OV: China at present can’t build enough wings/fuselages for both Tianjin and Mobile. Interesting idea, though.

          • @Scott

            Trump wants more production in the US — fine!

            You’d be looking at a win-win situation for both Airbus and Trump if large A320 assemblies and sections (fuselage, wing etc.) were to be manufactured in Mobile.

            Trump win: Can boast about bringing production “back” into the U.S.

            Airbus win: Hamburg Finkenwerder, for example, is nearly maxed out on A32Xneo fuselage production. Additional fuselage and wing manufacturing facilities in Mobile would IMJ make it possible for Airbus to increase A320neo production to 80+ per month — i.e. it’s not just Tier-1/-2/-3 suppliers in the supply chain that is a constraint in increasing production further.

            It would appear, therefore, as if MAGA and Trump’s actions could ironically help lead Airbus to further increasing their lead in the single aisle market — you know, Trump has probably never heard about the law of unintended consequences…..

            https://www.youtube.com/watch?v=affcUJDwSCk

          • Ship wings from Europe to China and from China to Mobile? Maybe still more cost-effective than paying the duties?

      • Don’t bet on it…the next A320 FAL will be Southeast Asia. Airbus Mobile has only employees 400 employees, might be not worth the fight

  9. God only knows what Trump is thinking, most likely thing that I can think of is a Nixon “don’t mess with me I’m a maniac”type play.
    Other possibilities are, trying to make up with Boeing for not committing political suicide by backing them up .
    Attempt to pressure EASA into accepting rapid recertification of the MAX.

    • Grubbie: You make a fundamental mistake in assuming Trump is thinking.

      As I tell my wife, do not attempt to interject logic into this.

      Its all random acts of Fox news snippets.

      It would be good to review Congress during the post Civil War Johnson administration, most insightful.

    • Because. Apparently.

      (writes whilst being no longer surprised at anything)

  10. I have two mercedes Benz . They qualify for what we call hanger queen in America. My Chevy keeps going 300000 miles plus. My Honda 255000 miles. My EU luxury cars reliabity is piss poor. Other people may have a different experience.

    • You just don’t have sufficiently trained people around.
      To drive it, to service them.
      ( you know you had that coming, right?)

      I am regularly surprised that US designed cars that regularly make the last place in reliability polls in Europe should perform any better in the US. ( and the reverse ) Thus I assume it is about bias conforming sabotage we see applied to foreign products in the land of the ???

  11. As the Brits would say “this is so boring”. Yes tariffs are important, things happen because of them but still, I would guess, not something many here have much time for.

  12. To what extent does this situation increase the probability of politics being played with the EASA upcoming 737 MAX review? Wouldn’t the risk of a lengthy and/or drawn out re-certification process be major European leverage over Boeing? And Trump / USA / Boeing are making the Europeans pay over the Airbus situation seems like incentive *in principle* for the Europeans to squeeze? Is EASA’s review of the 737 MAX a possible candidate for squeezing the Americans?

    It just seems to me EASA has Boeing by the important parts. Messing with Europe now, despite the no doubt professionalism and independent nature of EASA (aka they should be free of political interference….but I imagine there are levels to that), seems like an own-goal to me for Trump/Boeing.

    Am I correct in assuming the Chinese, and other major aviation markets will be privately putting greater stock in EASA’s findings on the 737 MAX given the FAA’s public black eye here? Giving the Europeans even more leverage here over Boeing

    Or is this all reading too much into things?

    • My guess is that this is about showing the torture tools of the trade
      to apply if EASA or associated parties start to be less than enthusiastic about uUNgrounding the MAX or niggling about 777X details.

      IN the past the US was very careful to hide any details of coercion or rather one sided contract details. Some ARTE documentary disseminated the Marshall Plan “side lines” of forced on fringe benefits to the US in conjunction with money lending ( mostly done to have sink for US products ).

  13. 11 billion? I thought after the last WTO round the number was a couple of billion. Airbus has remedied a lot of the benefits that aren’t allowed. And it would be even lower if the end of the A380 is taken into account.
    11 billion sounds like the number from the original complaint. No way the WTO will allow that.

    The problem for Boeing/USA is, Boeing has remedied very little of the benefits. The WTO will probably allow action on a large part of the 15 billion Boeing wasn’t supposed to get.

    • 11 billions at too low interest.
      The damage is in the interest delta. not the $11b i.e. a low % number of those $11b.

      The Boeing Tax gifts come in at full value ( or some more actually depending on bookkeeping curlicues).

  14. Almost sounds like a ploy from Putin’s Russia to kneecap both Airbus AND Boeing.

    • I’d guess he is an avid viewer of this Transatlantic “Großes Kino” 🙂

      .. and it is nice to see that my prediction that the US would go for leveling the table in aid to Boeing vs Europe and even faster than I expected. So very predictable.
      Back in times gone by they at least would have tried to go for a more stealthy path.

  15. If I am reading it correctly, a couple of the commentators seem to be indicating that EASA would hold up certification of Boeing aircraft as a “trade” weapon. I certainly hope nobody in the EU/EASA is contemplating such a thing. The last thing we need is aircraft certification, amongst other government/bureaucratic functions, to be “weaponized”.

    If they truly have a technical issue with some part of the certification of a Boeing made/FAA certified aircraft (which many assume could occur with the MAX), then by all means, stand for your rights, but don’t use it as a trade weapon.
    Such a route will not help any of us real people out there.

    • Neither does (effectively) blocking aircraft imports help anyone. That doesn’t stop the protectionist politicians from doing it, though.

    • I share a similar sentiments. The proposed tax covers components, wings, fuselages and other structures that Airbus imports into the US for its Mobile (AL) A320 final assembly line seems to be targetting specifically at the A320neo and A220. I would not rule out the possiblilty that Boeing had a long chat with president Trump to impose this tariff to prevent Airbus from running away with the single isle market shares while their B737max remains grounded and suffers from a damaged reputation.
      Nonetheless, should this tariff comes true, Boeing will have more to lose than airbus. Airbus has very little market share in the US but Boeing has a significant market share in the EU market. Aside from Delta and American, the rest of the US carriers are not due to recieve large amount of any aircraft soon. On the other hand, Norwegian and Ryanair are due to recieve a large fleet of B737max while there are many wide bodies B787 and B777X waiting to be delivered to an EU airline.

      • Airbus has a significant single aisle market share in the U.S. That’s why it would make sense for Airbus to set-up A320 wing and fuselage manufacturing in Mobile.

    • “The last thing we need is aircraft certification, amongst other government/bureaucratic functions, to be “weaponized”. ”

      The US has been doing this behind the curtains for years.
      NG certification was very contentious but it was pushed through.
      FAA has been reticent on A380 certification.

      To wit, US politics has been busy subverting any and all international treaties and organizations for their partisan purposes.
      For one sided advantage or for general snooping purposes.
      This has resulted in a pronounced loss of value for the global community.

  16. Cost of living is going to rise in the USA, triggering inflation then recession!

    I am happy to live on the right side of the border, we have an agreement with the EU 🙂

  17. Interesting if you read through the list, Mr.T. seems to have something against diary products and seafood?

  18. Ironically, with the A380 program now cancelled, WTO no longer cares about it. The only relevant part for the WTO would be the interest subsidy on the (much smaller) A350 launch financing

  19. For those James Bond movie fans, remember the scene in From Russia with Love when the two Siamese fish are fighting each other to the death while the third just waits to come in to finish the kill of both of them. Reminds of the aircraft subsidy fight with US (Boeing) and EU (Airbus) while China (COMAC) just sits and waits while putting $40-50 billion of subsidies in their commercial aircraft industry It makes the $8-11 billion tit for tat between US and EU look like chump change.

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