Airbus warns over risk to US jobs with Trump tariffs

US president preparing to slap 10% tariff on Airbus planes in response to WTO ruling

Photograph: INA FASSBENDER/AFP

Photograph: INA FASSBENDER/AFP

 

Airbus said American jobs are at risk as US president Donald Trump prepares to slap a 10 per cent tariff on its planes after the World Trade Organization authorized $7.5 billion in US duties against the European Union.

The levies will “have a negative impact on not only US airlines but also US jobs, suppliers and air travellers,” chief executive Guillaume Faury said after the WTO ruling Wednesday, adding that they’ll bring “insecurity and disruption” to the wider aerospace industry.

While the US will impose a heftier 25 per cent rate on agricultural products and other industrial items, according to a US Trade Representative official, the high cost of commercial aircraft - which sell from about $100 million at list prices - means the aerospace industry is especially vulnerable to any effective price hike.

“A 10 per cent tariff on a bottle of wine may not deter the Bordeaux aficionado, but the same for an Airbus plane may lead a US airline to defer delivery,” said Sandy Morris, an analyst at Jefferies in London.

Two-fifths of the components that make up an average Airbus jet come from the US, according to the planemaker, which faces levies alongside a host of other EU companies after the trade body found that it received illegal aid. That helps support 275,000 jobs in 40 states through spending that totalled $50 billion in the past three years, a figure it aims to double over the next decade.

Assembly line

Airbus has also been delivering A320 single-aisle jets from a final assembly line in Mobile, Alabama, since 2016 and added the A220 model in August. The Mobile site separately designs cabins and cargo systems for the entire aircraft range, while a facility in Wichita, Kansas, specializes in engineering design. The Airbus chief executive’s statement came before the US commented on the level of tariffs facing the company.

The WTO announcement marks the latest chapter in the body’s longest-running dispute, which also involves EU claims against Airbus rival Boeing. The feud is further testing trans-Atlantic relations that have deteriorated under Trump’s “America First” strategy.

Airbus had almost 900 unfilled orders from US customers at the end of August, compared with Boeing’s EU backlog of close to 600 jets.

Airbus urged the US to take account of a looming WTO decision on a parallel case regarding the size of tariffs Europe can impose over subsidies paid to Boeing, saying they could exceed the value of the US sanctions and repeating calls for a negotiated settlement.

Tit-for-Tat

European trade commissioner Cecilia Malmstrom said in a statement that the bloc shared “concrete proposals” for a new regime on aircraft subsidies and a way forward for existing compliance obligations as recently as July, but that the US has not so far reacted.

Ms Malmstrom added that Europe will respond in kind to US countermeasures, while warning that a tit-for-tat escalation will harm global trade and the aviation industry, and that a “fair and balanced solution” must be sought.

US carriers have also pushed back against levies, with trade group Airlines for America saying tariffs on aircraft would be “unprecedented” and negatively impact both the country’s aviation industry and economy.

Boeing said Toulouse, France-based Airbus and other European businesses face tariffs because its aerospace rival refused for years to conform with WTO rulings. The US manufacturer said it’s not too late to avoid the levies if Airbus comes into “full compliance with its obligations.” – Bloomberg