UK says will drop tariffs on US goods to ease aircraft trade dispute

UK says will drop tariffs on US goods to ease aircraft trade dispute

The United Kingdom will suspend retaliatory tariffs imposed on US goods as part of a dispute over aircraft subsidies from January 1, the trade department said, describing the move as an attempt to de-escalate a damaging international trade conflict.

The decision marks the start of the UK’s divergence from European Union trade policy, coming into effect on the day its exit from the bloc’s rules and regulations is complete and signals an ambition to forge closer ties with the United States.

The multibillion-dollar tit-for-tat tariff battle between the US and the EU relates to a long-running dispute over state subsidies for aircraft manufacturers Airbus and Boeing.

“Ultimately, we want to de-escalate the conflict and come to a negotiated settlement so we can deepen our trading relationship with the US and draw a line under all this,” trade minister Liz Truss said in a statement.

No comment was immediately available from the US government or the EU.

UK can reimpose tariffs

Although the UK formally left the EU in January, under the terms of an 11-month transitional exit arrangement it joined the EU in applying tariffs on $4bn of US goods in November.

The measures were authorised by the World Trade Organization (WTO) following a 2019 WTO decision to approve US tariffs on $7.5bn of EU goods.

However, the UK said it would suspend its tariffs to try to persuade the US to reach a settlement, albeit with a warning that they could re-impose them “if satisfactory progress towards an agreeable settlement is not made”.

For its part, the EU is pessimistic about the chances of an abrupt change in policy from the US, even as Donald Trump’s “America First” presidency comes to an end.

Steel dispute remains

Truss has repeatedly criticised the US tariffs, which have hurt British exports such as Scotch whisky.

The Distilled Spirits Council of the US applauded the UK’s decision and urged Washington to seize the chance to work with London to resolve the aircraft subsidy dispute and move to end steel and aluminium tariffs.

Since 2018, bourbon whiskey and its Scotch relative have been caught up in various transatlantic tariffs aimed at applying pressure on key political constituencies. The EU chose bourbon in large part because it is a product of the red state of Kentucky, home to Senate Majority Leader Mitch McConnell.

Having quit the EU following a narrow vote in a 2016 referendum, the UK is keen to capitalise on its new-found freedom to strike bilateral trade deals.

The US is seen as top of the British wish list, although talks with Trump’s administration made only limited progress and it remains to be seen how highly President-elect Joe Biden will prioritise such a deal.

US and European officials are meeting at a senior level to resolve the aircraft subsidies dispute, according to multiple sources familiar with the matter.

The UK’s move is “good news” for aviation in the US and UK, Boeing said.

“This suspension of harmful tariffs allows us to work with the UK as a global commercial aviation hub and offers continued support for our employees in Puget Sound and Charleston,” the Chicago-based company said in a statement. “We support a level playing field with free and fair competition across aviation.”

Truss said separate tariffs on US goods relating to a row over steel and aluminium would remain in place after January 1 to protect those industries in the UK.

The US in 2018 imposed tariffs on steel and aluminium coming from the EU, citing national security concerns. The EU, including the UK at the time, retaliated with its own set of tariffs, arguing the US concerns were unfounded.

Truss said the British government would consult with the steel and aluminium sector to see if the tariffs on US goods could be better tailored to suit the British economy.