Suspension of the tariffs between the US and the EU derived from disputes over public aid to Boeing and Airbus

In a joint statement on March 5th, the US and the European Union have agreed to an immediate suspension of the tariffs that had arisen as a result of disputes associated with public aid to Boeing and Airbus. A similar agreement between the US and the UK was announced the prior day.

These conflicts, managed within the framework of the World Trade Organization (WTO), had led to the authorization by WTO of tariffs on a wide range of products from both sides. 

This confirms the expectations we had explained in our recent article The Biden Era is Coming: Impact on Companies International and in which we said “It is to be hoped that the new administration will resume international collaboration within the framework of the World Trade Organization and seek ways to end the tariff wars of recent years”. 

Without a doubt, this agreement causes a very significant de-escalation of the tensions created in recent years on the commercial relationship between the two blocks.

This is excellent news that will undoubtedly favor the activity of many companies in the European Union, exporting to the US. As it reads in the statement:

“This will allow the EU and the US to ease the burden on their industries and workers and focus efforts towards resolving these long running disputes at the WTO”

This measure can be compared with statements made by the US Trade Representative, Katherine Tai at the end of March, stating that there are no plans at this time to reduce tariffs applicable to China

All of this is consistent with the policy announced by Biden during his electoral campaign in which he advocated strengthening US relations with traditional allies such as the European Union and firmly negotiating other commercial relations, betting on a rules-based international order, led by the United States, with an emphasis on reducing trade barriers, but establishing global trade standards.

The suspended US tariffs increased others existing previously adding a rate of 25%. for certain food products. This had caused immense damage to exports of European products such as wines, cheeses, olives, olive oil, liqueurs and certain luxury items. They managed to reduce the volume of sales of these products to the US by up to 70% in certain cases, such as Spanish olive oil and olives. On some occasions, the producers or exporters decided to assume the impact without transferring the cost to the final customer, accepting the associated economic deterioration on their balance sheets. In the same way, the US had imposed a 10% tariff on certain European aeronautical imports, which is also suspended now.

It is important to note that the agreement, which is a temporary suspension, must be consolidated with a permanent elimination of these tariffs. It should also be taken into account that there are other tariffs apart from those that have been suspended and are still in force, some of them imposed during the Trump era, as was the case with those applicable to steel imports. There is also an open conflict between the US and the European Union over digital taxes, the so-called ‘Google Tax’. All of this will have to be negotiated in the coming months, so the uncertainty has not ended yet.

Either way, the agreement should be considered as excellent news for international companies with an interest in the US market.