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?
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
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.