Positive messages from the European Union and US President-elect Joe Biden offer hopes of a de-escalation in transatlantic trade tensions.
The US has imposed new tariffs on a range of EU goods, including aircraft parts and wine.
In a statement released on January 12, the European Commission expressed its regret over the US’ decision to impose new tariffs on further EU products. It added that it is looking forward to engaging constructively with the new US administration to resolve this long-lasting dispute as part of a renewed transatlantic agenda.
The statement was made immediately following the Trump administration’s announcement of additional tariffs on a range of EU exports to the US. According to the Office of US Trade Representative, tariffs of 15% and 25% will be levied on aircraft components and some types of alcoholic drinks, respectively.
The new wave of tariffs is Washington’s latest move in a 16-year spat over subsidies for aircraft manufacturers Airbus and Boeing that turned increasingly sour under US President Donald Trump.
The tariff war has become more tense since October 2019 when a WTO ruling allowed the US to impose tariffs on EU goods worth US$7.5 billion each year. The figure is based on the estimated damage caused to the US due to EU subsidies for Airbus. With the greenlight, the US then imposed high tariffs on a range of EU goods, including aircraft parts and alcoholic drinks.
One year later, the WTO issued another ruling but in the EU’s favour. Accordingly, the EU is permitted to impose tariffs on US goods and services worth US$4 billion each year, equal to the damage to the EU as a result of US subsidies for Boeing. Earlier, the US and the EU had been on the brink of a trade war in 2018 when the US levied tariffs on EU aluminium and steel. In retaliation, the EU made a long list of US goods subject to high tariffs when imported to the bloc.
In recent years, the US-EU alliance has faced constant tensions due to disagreement on various issues, from security, climate to technology, and especially trade. Long-standing disputes and tit-for-tat tariffs threaten to destroy transatlantic trade relations, with two-way value estimated at US$1,300 billion. Escalating trade conflicts have also undermined the confidence and activity of investors and businesses, posing risks to the financial market as well as the economies of both sides and the world at large.
Aware of the fact that there is no winner in a tariff war, both the EU and the US wish to negotiate. In July 2018, the two sides agreed to a truce and started negotiations on a new bilateral trade agreement. But waves of tariffs on each other’s goods have continued to throw both sides into disagreement. Both the EU and the US have announced that they are willing to engage in talks, but no considerable concessional moves have been made.
The US now has a new administration and President-elect Joe Biden conveyed a message of change, in which he shared that US protectionist policies and moving away from multilateralism and global cooperation can be reversed. Along with the EU’s statement on the desire to look for a truce agreement on trade with the US, hopes of a positive transatlantic agenda have flared up.
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