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TRADE: Is America ready for a major two-front trade war?

PortandTerminal.com, July 4, 2019

Donald Trump has threatened fresh tariffs on $4bn of European products including cheese, scotch whisky and olives, ratcheting up pressure on the EU in a long-running row over aircraft subsidies.

Brussels, Belgium – With most of the oxygen in the room these days being consumed by the punishing China/United States trade war, it would be easy to overlook the fact that China is NOT the United States’ largest trading partner. The European Union is. And now that relationship is being strained to the breaking point too as the Trump administration threatens new tariffs on $4bn of EU products.

Boeing vs Airbus

Both the European Union and the United States claim that each other’s airplane manufacturer is unfairly subsidized.

It was the US that filed a case with the World Trade Organization (WTO) in 2006 claiming that Airbus, which is jointly owned by Germany, France, Spain and Britain’s BAE Systems, had received $22 billion (€19.4 billion) in illegal subsidies. US officials estimated that the subsidies had resulted in an economic benefit of more than $200 billion.

The EU retaliated with a counter case, claiming that Boeing had received $23 billion in “trade-distorting” subsidies in the US mainly for its research and development projects. 

Over the years, the WTO has ruled that both sides unfairly subsidized their aircraft makers.

America’s trade with the EU

Aircraft are the United States largest export to the European Union

The EU is in a delicate balancing act, as deteriorating US-China relations coincide with its own widening rift with the US over trade.

The United States is also in a difficult position as well despite President Trump’s claims to the contrary. Wars waged on two fronts rarely go well. The US is already embroiled in a punishing trade war with China, its third-largest export market. Is America really ready to go to war now with the EU, its largest export market as well?

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