By Jasmine Dohemann

For 15 years, the U.S. and EU have been in a legal battle over aerospace subsidies.[1] The U.S. has accused certain EU member states of providing massive illegal subsidies to the European aerospace company, Airbus.[2] However, on October 2, 2019, the World Trade Organization (“WTO”) ruled that the U.S. was allowed to take countermeasures against the EU in the form of retaliatory tariffs or suspension of horizontal or sectoral commitments and obligations of the U.S., except for financial services.[3] The WTO held that the illegal financial backing of several airbus models was contended to have detrimentally affected Boeing.[4] Though the U.S. previously sought to impose $11.2 billion in tariffs on European goods, the $7.5 billion award is the largest arbitration award in WTO history.[5]

This is not a one-off award: the WTO’s ruling allows the U.S. to impose $7.5 billion in retaliatory tariffs annually until the EU complies with WTO rules, or until the two sides can negotiate a settlement.[6] However, the U.S. is not in the clear quite yet: the WTO will be ruling on a case alleging that the U.S. improperly subsidized Boeing, violating WTO rules.[7] If the WTO rules in the EU’s favor in its case against the U.S., the EU will be able to impose retaliatory sanctions of its own against U.S. goods.[8]

On October 18, 2019, the tariffs will begin to go in place.[9] The U.S. has had a list of EU tariff targets since July 15, 2019, including items such as coffee, cheeses, olives, and fruit.[10] While the EU is not allowed to retaliate against the U.S.’s  imposition of WTO-authorized retaliatory tariffs, this decision will undoubtedly cause further strain on an already tense relationship between the EU and U.S.[11] The relationship has been tenuous since the U.S. imposed aluminum and steel tariffs against the EU last year.[12] Further, the EU may revoke previous settlements with the U.S. to mitigate financial losses until the WTO issues its decision about the Boeing subsidies. In particular, the EU has considered revoking a 2006 settlement with the U.S. that gave tax-exemptions enjoyed by foreign-sales corporations like Boeing.[13] Doing so would help the EU mitigate the $7.5 billion in tariffs the U.S. is preparing to impose. However, a trade war between the U.S. and the EU could prove problematic, especially since their economies are both slowing down.[14] The EU is considered to be on the brink of a recession, and a battle between the EU and U.S. will not alleviate fears faced by various industries.[15] Employment rates, the service industry, and the manufacturing industry are all at risk.[16] Arguably, the WTO’s award could not come at a worse time for the EU. Brexit is set to become effective on October 31, 2019, and Germany, the EU’s largest economy, is seeing its manufacturing industry at its lowest in a decade.[17]

If the EU were to attempt to lessen the damage by revoking its settlement, it would affect approximately $4 billion in U.S. exports and might push the U.S. to invoke tariffs on European cars.[18] This might create a slippery slope effect, especially given Trump’s aggressive trade strategy.[19] Even if the EU were to wait for a WTO decision in their favor, the tit-for-tat trade war would amplify as each country tries to mitigate the blow of the other’s retaliatory tariffs.[20] Ideally, the U.S. should open the door to a negotiated settlement and the EU should comply with WTO rules.[21] Both parties claim to be open to negotiations, but there is no sign of the U.S. delaying the WTO-authorized tariffs.[22] If the U.S. and EU continue on this path, there will be no winners in this war between global powers.

[1] Dispute Settlement Summary, European Communities and Certain Member States-Measures Affecting Trade in Large Civil Aircraft, WTO Doc. WT/DS316 (Oct.  2, 2019).

[2] Press Release, Office of the U.S. Trade Representative, U.S. Wins $7.5 Billion Award in Airbus Subsidies Case (Oct. 2, 2019) (

[3] Arbitration Report, European Communities and Certain Member States-Measures Affecting Trade in Large Civil Aircraft, WTO Doc. WT/DS316/ARB (Oct. 2, 2019).

[4] Id.

[5] Ana Swanson, U.S. to Tax European Aircraft, Agriculture and Other Goods, N.Y. Times (October 2, 2019),; Bill Chappell, WTO Says U.S. can Hit EU with $7.5 Billion in Tariffs Over Airbus Subsidies, Nat’l Pub. Radio (October 2, 2019),

[6] Swanson, supra note 5.

[7] Liz Alderman, Ruling on Airbus Subsidies Could Escalate Trade Tensions with Europe, N.Y. Times (May 15, 2018),

[8] Swanson, supra note 5.

[9] Notice of Hearing and Request for Public Comments: Enforcement of U.S. WTO Rights in Large Civil Aircraft Dispute, 84 Fed. Reg. 32248 (proposed July 5, 2019).

[10] Id.

[11] Id.

[12] Emre Peker, U.S. Can Levy Tariffs on EU Exports Over Airbus, WTO Says, Wall St. J. (October 2, 2019),

[13] Id.

[14] Ben Winck, A Flood of New Data from the U.S. and Eurozone Suggests Recession Risks are Flashing Red. Here’s a Full Rundown of the Wreckage, Bus. Insider (October 4, 2019),

[15] Yusuf Khan, Trump’s Trade Attack on Europe Couldn’t Come at a Worse Time for a Region on the Brink of Recession, Bus. Insider (October 3, 2019),

[16] Winck, supra note 14.

[17] Id.; see also Melanie Debono, Euro-Zone Retail Sales (Aug.) & Final PMIs (Sep.), Capital Econ. (October 3, 2019), (finding that Germany’s PMI, a standard to measure economic health, was at a seven-year low at 48.5, indicating that the German economy will likely enter a recession in the third quarter).

[18] Peker, supra note 12.

[19] Swanson, supra note 5.

[20] Peker, supra note 12; Swanson, supra note 5.

[21] Chappell, supra note 5.

[22] Swanson, supra note 5.

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