On July 1, the Office of the US Trade Representative suggested slapping tariffs on US$4 billion of EU products to exert pressure over the 15-year dispute surrounding civil aircraft manufacturing subsidies, reported yicai.com.
The US has had a long-standing trade imbalance with the EU, Zhou Hua, associate professor at the School of Economics and Management, Tongji University, and Fan Jiachen, a master candidate at the school, wrote in an article for the portal.
In 2018, EU’s trade surplus with the US hit a record 139.7 billion euros (US$157.2b) because of the reduction in US-made civil aircraft exports.
Boeing, a major US aircraft maker and rival of Europe’s Airbus, has seen its development slow in recent years. While its R&D investment has been only one-third that of Airbus, the 737 MAX accidents this year were a huge blow to business.
The Trump administration is also likely ratcheting up pressure on the EU to extract a good deal from it, they noted. Also, as formidable Democratic challengers emerge for the upcoming 2020 general election, such as former US Vice President Joe Biden, Trump wants to trigger yet another international dispute to shift domestic attention.
As for the impact, Zhou and Fan wrote that the US would harm itself as much as the EU. Its tariff list targets mainly primary products like meat, yogurt, whisky and olives, which will raise production costs of its downstream industries and living costs of residents. The move would also affect confidence in the US market, which could further slow economic growth.
In contrast, the tariffs will not seriously affect the EU, because the US is targeting only a small share of imports, none of which fall within the EU’s key strategic industries.
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