The United States is, from today, levying a 25% duty on imported aircraft parts coming from France and Germany. The tariff will have a significant effect on production of the Airbus A320 in Mobile, Alabama, something which Airbus has claimed will only hurt US workers.
New tariffs on aircraft parts from today
The United States government has implemented new tariffs on European goods being imported to the US, starting today. Among the goods to see an impact from the widened net of additional duty are European made wines, which will attract a 25% duty, and French and German-made aircraft parts, attracting a 15% tax.
The new duties are being imposed from 12:01 ET today. They come as the tit-for-tat battle over aircraft subsidies continues to escalate. Both Boeing and Airbus are accused of taking government subsidies to support their businesses, and both Washington and Brussels have won cases at the World Trade Organization to levy tariffs in response.
Washington was granted tariffs of $7.5 billion on EU goods, and the EU added duties on $4 billion of imports from the United States. The 16-year-long dispute shows no signs of abating, as Reuters reports talks between the two parties have stalled in recent weeks.
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Airbus says tariffs are counterproductive
The implementation of these tariffs on aircraft parts will hit A320 production in the United States, which uses components made in France and Germany. Airbus’ site at Mobile, Alabama, delivered more than 40 A320 family aircraft in 2020. Airbus has warned that the expansion of tariffs will be counterproductive, only serving to harm US workers at its US factory.
Previously, entire aircraft imported to the US were already included in the tariffs. The addition of components has closed a loophole that had allowed Airbus planes assembled in Mobile to avoid the tariffs. Without a swift resolution to the situation, these aircraft are now unlikely to be competitively priced for US operators.
In the short term, the effect will be subdued as most components would already have arrived in the US for forthcoming aircraft. However, in the longer run, the impact could be significant. Unlike other short-notice tariff actions, the United States has not granted any exclusions for items already in transit. The tariffs were announced less than two weeks ago, with typical ocean shipments taking from 22 to 40 days to arrive.
Hope for a cease-fire?
With the change of administration in the US just days away, are there any hopes for a renewed impetus to negotiate the situation? While Biden himself may be a more measured President, his administration might not be so flexible.
The new Airbus opponent in the White House will be Katherine Tai, replacing Robert Lightwater, who had handled the dispute under President Trump. According to the Biden-Harris transition team,
“Katherine Tai is a dedicated, deeply respected public servant and veteran international trade expert who has spent her career working to level the playing field for American workers and families.”
While Tai is an experienced trade negotiator and unlikely to be willing to back down from pressure alone, she will be faced with a demand to mediate on the matter. The two sides must avoid any further tit-for-tat tariffs and will need to flesh out a mutually agreeable competition framework if it is to de-escalate the long-running dispute.
