Aerospace & Defense

US to Impose Tariff on Parts Used to Build Airbus Planes in This State

In an announcement Wednesday, the Office of the U.S. Trade Representative (USTR) said that the United States will impose new tariffs on Airbus aircraft parts imported into the country from France and Germany and used to manufacture Airbus planes at its assembly plant in Mobile, Alabama. Beginning on January 12, the United States will impose a 15% tax on fuselage, wing and tail components imported into the country.

The new tariffs are just the latest shot fired in a battle that has now been going on for 16 years. Initially, Boeing Co. (NYSE: BA) and the USTR filed a complaint with the World Trade Organization (WTO) alleging that the European Union had illegally subsidized the development of certain Airbus airplanes. Airbus fired back with similar charges against the United States for subsidies to Boeing.

In October of last year, the WTO authorized the United States to impose duties totaling about $7.5 billion as a result of the agency’s determination that the EU had acted illegally. Then in September of this year, the WTO imposed tariffs of $4 billion resulting from U.S. subsidies to Boeing.

According to the USTR’s announcement, U.S. actions related to the tariff are based on a dispute with the EU over the period Europe used to calculate the tariffs. The result was “to unfairly increase the retaliation for the 52 days in which the UK remained within the EU for tariff purposes.”

In a statement from Airbus cited by Leeham News and Analysis, the EU planemaker commented:

The USTR’s expansion of tariffs to include components for aircraft manufactured in the U.S. – by American workers – is counterproductive in every way. We regret that USTR has decided to escalate this dispute by taking a step that hurts US manufacturing, US workers, and US consumers. This will not contribute to a climate of trust to create a negotiated solution. Airbus trusts that Europe will respond appropriately to defend its interests and the interests of all European companies and sectors, including Airbus, targeted by these unwarranted and counterproductive tariffs.

The USTR also has increased tariffs on some non-sparkling wines from France and Germany and some cognac and other grape brandies from the same countries. The full USTR notice is available here.

Boeing stock traded down about 0.6% just after Thursday’s opening bell, at $215.42 in a 52-week range of $89.00 to $349.95. The stock’s consensus price target is $230.74. Likely retaliation from the EU is a bigger blow to Boeing than are the new tariffs on Airbus, although the European company’s stock traded down more than 1.5% in late afternoon trading in Paris.

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