Silly: US To Impose Tariffs On Airbus Planes

By: Ben Schlappig

Published: October 3, 2019

66 comments

In what can only be described as the latest trade spat between the US and the world, many Airbus jets are about to get a lot more expensive for US airlines. President Trump has said that trade wars are good, and easy to win… is that the case here?

In this post:

US To Impose 10% Tariff on Airbus Jets

After getting approval from the World Trade Organization this week, the US plans to impose tariffs of up to $7.5 billion on aircraft and some other goods from the European Union. This comes after the WTO ruled on the EU’s subsidies to Airbus.

These new tariffs will kick in on October 18, 2019. While the US is authorized to have up to 100% tariffs on up to $7.5 billion of goods, they’ll be adding a 10% tariff on Airbus jets manufactured in the EU. Boeing was pushing for a 100% tariff on Airbus jets (because of course they were).

The irony in all of this is that it has been determined that both Airbus and Boeing have received “illegal government subsidies,” but the case against Airbus happened first.

As US Trade Representative Robert Lightizer said in a statement:

“For years, Europe has been providing massive subsidies to Airbus that have seriously injured the U.S. aerospace industry and our workers. Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies.”

Airbus has of course encouraged the US to reconsider this decision, noting that it will harm the aircraft industry, hurt trade relations, and even damage the global economy.

Which Airbus Jets Does This Impact?

It’s worth noting that Airbus actually has some plants in the US, so it is possible for many Airbus jets to be manufactured without assembly happening in the EU:

The A220 is assembled in both Canada and Alabama
A320 family aircraft are assembled in Alabama

The A220 is assembled in North America

So unless I’m missing something, I think the only Airbus jets currently ordered by US airlines that could only be produced in the EU would be Delta’s A350-900s and A330-900neos.

The new tariffs will apply to the A330-900neo

What also makes this kind of silly is that Airbus plants in the US get a majority of their parts from the EU. So there are no tariffs if the parts come from the EU and are assembled in the US, but there are tariffs if the plane is assembled in the EU.

So this isn’t even a tariff on the product as such, but rather on the assembly of the product.

The Timing Of This…

Not that these tariff arguments are ever especially well timed, but this comes at the same time that Boeing is really struggling while Airbus is thriving. Not only is Boeing’s popular 737 MAX grounded globally, but Airbus has also introduced some innovative new products, like the A321XLR.

Airbus has announced the A321XLR

Bottom Line

The WTO has found evidence of “illegal” subsidies to both Airbus and Boeing, and the Airbus case has gone through first. Should some practices be changed here? Probably.

But this also seems like a lose-lose situation. You have Boeing pushing for a 100% tariff on Airbus planes. Would Boeing like a 100% tariff on their planes going to Europe? I think probably not…

I’ll be curious to see how long this lasts, and if the parties involved come to their senses here.

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Mark S. Member

October 7, 2019, 7:04 pm

@Brad, Respectfully, as an Import manufacturer spending time up to my eyeballs in CBT, GSP and other International trade regs and issues, I understand the practice of dumping and the anti - dumping duties which are employed to "level the playing field" and to some degree, punish the offender For example, Chinese glassware importers (not China manufacturers) pay a 31% anti dumping duty when dealing in FOB price-points of less than (I believe) US1.00. This is anti-dumping fair-n-square and very effective. The "evolved" tariffs, including this one, does not penalize Airbus or level the playing field. I hurts the US consumer buying Irish whisky, in my case Scotch, and cheese, olive oil, etc. Like the current China trade war tariffs, the Airbus/EU levee does not penalize Airbus who will sell or lease to carriers in other legitimate ways or even the EU Government(s) very much.. It just slaps a new tax on unwitting consumers of unrelated products. I wonder which innocent EU'rs will get hit when Boeing's complaint is resolved early next year. I hope you are not one of those folks who still think "China" is paying the tariffs (!!) . and Unicorns exist. I wish both were true.

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Brad K Guest

October 4, 2019, 11:42 pm

Ben, This case has gone through the WTO which is no small hurdle and you trivialize the ruling by calling it “silly”. The basic concept is called dumping, which is to sell a product for less than it costs to produce. This is what Airbus has been effectively found guilty of through the massive governmental subsidies they receive and in the world of global trade this is plain and simple cheating. If you are going to opine on such a matter take the time to actually do some real research into the matter and don’t just post a simplistic trivial opinionated story.

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Leeza1 Guest

October 4, 2019, 9:21 am

How can EU tax boeing planes if they can't delivery any?

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Jean Claude Juncker Guest

October 4, 2019, 8:26 am

I just love how @The Nut Paul has unilaterally appointed herself supreme authority and sole speaker for EU business. LOL. Excuse me, I'm "banging on" too much.

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Ourmanin New Member

October 3, 2019, 9:40 pm

@Rob - you’ve got every right to be rabidly pro American if you wish, but at least be accurate. Neither taxes nor fines can be considered cash grabs. The level of taxation most large tech companies pay (including in America) is pitiful. Look where the majority choose to keep their cash piles. That does nothing for the US as a nation, let alone anywhere else, unless you consider their societal role is to make a fraction of 1% of the nations people even richer, inflate Californian property values and support the private jet industry. And if you want to discuss fines then let’s look at some of the fines the US has charged EU financial corporations post 2008. Did that money get paid back to the EU? If you commit an offence (for which a fine is the punishment) then of course it’s collected in the jurisdiction in which it’s committed. No ones forcing facebook to operate in the EU, but if they do then they have to follow EU rules. And when it comes to effective subsidies it’s hard not to laugh when the US aviation market is discussed and you fail to mention Chapter 11 protection. How much money has been blown away on that over the years.. No similar support exists for carriers in the EU. As I say you are welcome to your view, just be cognisant of the facts and be fair.

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