WTO Sides With US, Says US Can Retaliate For Billions In Illegal Airbus Subsidies

Just as the US-China trade talks are set to resume at the highest level, the WTO has made a second front in the global trade war far more likely, when moments ago the World Trade Organization gave President Trump a green light to impose tariffs on as much as $7.5 billion worth of European exports annually in retaliation for illegal government aid to Airbus SE.

• WTO ON WEDNESDAY ISSUED RULING ON 15-YEAR-LONG U.S. TRADE CASE VS. AIRBUS
• WTO SAYS U.S. CAN RETALIATE AGAINST $7.5B IN EU GOODS A YEAR
• U.S. EXPECTED TO IMPOSE TARIFFS ON EU BEFORE NEGOTIATING SETTLEMENT
• U.S. HAS RIGHT TO RETALIATE FOR ILLEGAL EU SUBSIDIES TO AIRBUS -WTO

The decision represents one of the last hurdles before the U.S. can announce which products from the European Union it will target with tariffs selected from an initial list that includes:

• Airbus planes and parts
• Wine and spirits produced by LVMH, Remy Cointreau SA, Pernod Ricard SA and Diageo PLC
• Leather goods manufactured by Christian Dior SE and Hermes International

The new tariffs can take effect after the WTO adopts the report, which is expected to happen at a meeting in Geneva this month. According to Bloomberg, the award is the largest in WTO history, and is nearly twice as large as the previous record of $4.04 billion set in 2002.

More importantly, the long-awaited ruling marks a milestone in the WTO’s longest-running dispute that will further test transatlantic relations which have deteriorated under Trump’s “America First” approach to international ties, with tariffs now virtually assured. It’s also an example of Trump getting a favorable ruling from an organization he has threatened to pull out of.

The development is terrible news for Europe, which is effectively already in a recession with European manufacturing contracting sharply as a result of the ongoing U.S. trade war with China; any wider flareup of tit-for-tat tariffs with Europe will further threaten the global economy and accelerate Europe’s contraction.

Not coincidentally, just one day earlier, on Tuesday, the WTO cut its own trade growth forecast for this year to the weakest level in a decade, warning against a “destructive cycle of recrimination”, a cycle which it itself ironic stoked just one day later.