The United States (US) is set to kick in new tariffs on aircraft parts from France and Germany. The move comes after the US and the European Union (EU) failed to reach an agreement on a 16-year-old dispute over aircraft subsidies.
The US Trade Representative (USTR) office is set to impose an additional tariff on aircraft parts, including wing assemblies and fuselage, reaching 15%, coming into effect from January 12, 2021. In addition, the American authority will add a 25% tariff duty on certain wines.
The new measure comes as a part of the Airbus and Boeing long-lasting battle over government subsidies. The US tariff update might negatively affect the Airbus A320 production as the plane manufacturer uses aircraft components from France and Germany. According to Airbus spokesman, the company has already completed a delivery totaling more than 40 A320 Family aircraft in 2020, but due to the ongoing COVID-19 pandemic, the number of deliveries may shrink in 2021.
While the new duties on aircraft components may also hit the production of Airbus in the longer-term, the initial impact of the new tariffs may not affect the plane manufacturer instantly as in order to ensure smooth production flows, the company acquires larger aircraft components such as fuselages and wings in advance.
Despite that the US has already applied initial 10% rate tariffs on aircraft in 2019, Airbus had found a loophole regarding the plane components and was able to sell planes assembled in Mobile, an assembly site for Airbus’s Commercial Airplanes division located in Alabama, without tariffs for the US market.
The trade war between the US and the EU began 16 years ago. Since 2004, both parties of the dispute have been accusing each other of providing illegal public aid to their respective aircraft manufacturers, Boeing and Airbus. The World Trade Organization (WTO) has ruled that both manufacturers have been receiving unfair subsidies.
The EU was found to have unfairly supported the development of two Airbus programs, the late A380, and the A350. As for Boeing, the manufacturer received unjustified tax breaks from the US authorities. Both parties estimate that subsidies harmed their business by more than $10 billion per year.