Against the backdrop of the COVID-19 recession, U.S. aircraft rates are taking effect.

The Trump administration enacted its planned duty rate increase for aircraft imported from the EU on Wednesday (18 March), amid the continuing spread of COVID-19 and fears of a subsequent recession. These measures will increase the rate from 10 to 15%, particularly impacting Airbus.

With Europe’s airlines already reeling from cancelled flights and the US COVID-19 travel ban, the White House dealt another blow to the European air travel industry as duty increases on EU aircraft came into effect at midnight. This came despite recent pleas from US airlines to the administration to halt the new tariffs, as they struggle to cope with the coronavirus.

European officials condemned the decision to move forward with the new tariffs in the face of the COVID-19 health crisis and a potential recession. EPP MEP Christophe Hansen, the group’s spokesperson for the Committee on International Trade (INTA), called the move “an irresponsible and dangerous distraction from the fight that really matters today.”

The EU is unable to react to these new tariffs, as they were approved by the WTO last October in response to a long-standing US complaint that European Airbus subsidies put its US competitor Boeing at an unfair disadvantage. The decision allowed the US to recoup losses through the taxation of up to $7.5 billion worth of European exports annually.

Airbus has issued statements that it intends to “mitigate effects of tariffs insofar as possible.”

Europe’s airlines – already reeling from the coronavirus outbreak – are expected to be hard hit by US President Donald Trump’s 11 March ban on flights from the Schengen area, which has already been criticised by EU heads as unilateral and disproportionate.

New measures despite initial optimism for a resolution

The White House announced their new EU tariffs in mid-February. Alongside the additional taxes for aircrafts, the US Trade Representative (USTR) made minor modifications to the tariffs on wine, cheese, and other products, according to a statement released at the time.

When the new measures were first announced, officials on both sides sounded optimistic about the ability to avert them. USTR voiced their openness to working with the EU.

“The United States remains open to a negotiated settlement that addresses current and future subsidies to Airbus provided by the EU and certain current and former member states,” the office wrote in the statement first announcing the measures.

EU Trade Commissioner Phil Hogan initially also hoped to reach an agreement with Washington, saying in Davos that “they have given us 30 days of suspension of those tariffs on Airbus products, which will give us that chance hopefully to make some sort of an agreement…with political goodwill on both sides, we can do a lot in a short period of time.”

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