US-EU Aviation Dispute Escalates: Tariffs Hike to 15% - Essay Sample

Introduction

The protracted dispute pitting Washington and E.U. has escalated further with the former imposing a higher tax on a plane from the European Union. For years, Washington and Brussels have traded accusations of unfairly subsidizing respective aviation giants, Boeing and Airbus. In a show of dissatisfaction, The United States has used the tariffs tool to mount pressure on E.U.; the tariff will shoot to 15 percent from the initial 10 percent. This is a move majorly influenced by the current administration's fundamental goal of putting America first in all spheres. Other goods coming from E.U. countries are equally affected as the existing high tariff of 25 percent is retained by the U.S. Trade Representative. The Scotch Whisky Association has decried the move that is weighing heavily on their business.

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Being out of E.U. does not cushion the U.K. from the high tariffs, at least not before the transition period elapses in 2021. Apart from whiskey, the renewed U.S. tariffs threat affect meat and dairy products from E.U. and U.K., books, tools, and fruits. This action sanctioned by the U.S. Trade Representative only targets countries that manufacture airbus. The situation could have been made worse by the United States' earlier intention of increasing the many tariff folds, thanks to the consultation that occurred in mid-December.

It is an economic fact that trade barriers such as tariff reduce economic output and income (Amiti, Redding & Weinstein, 2019). Low taxes on aerospace products have provided consumers with efficient and effective aircraft that link the world. "Therefore, if the current US-European Union trade spat is allowed to continue, its impact will be felt far and wide. Tariffs would ultimately increase prices of goods and services and lower their quantities, especially for producers in the United States and their consumers. The outcome would be things such as low income, unemployment, and minimum economic output. Meanwhile, the tariff is already affecting some industries from the E.U. region.

Karen Betts, the CEO of Scotch Whisky, has admitted to the impact of tariff sanction just four months into implementation. He decried the unfortunate turn of events that has seen the loss of millions in their export. One can only imagine how worse the situation can get if thing remains the way they are. On his side, Boris Johnson, U.K. Prime Minister, has stated his plans to leverage their after-Brexit freedom to find a way through the whole situation and further bring to an end the 25 percent E.U. tariff.

Figure 1: the effects of tariffs on the economy

The United States remain adamant that tariff sanction on E.U. would stay until Brussels cooperate. However, in the legal statement released by Washington, the U.S. maintains that it is open to negotiation. In essence, the U.S wants a talk that would address issues pertinent to the subsidies by the European Union. In the same statement, Washington warned of an increased escalation in case of any retaliation by the E.U. in any way including pursuing the long claims that Boeing received unfair subsidies in the U.S.

Trump's administration has a different view. Trump's economic policy is anchored on American protectionism, and tariffs are the best tool for it. In other words, if E.U. fails to oblige to U.S. demand, the resulting situation would favor the growth of American industries. Here is how it could unfold: tariffs will make the price of imports high hence drifting consumers toward American goods. The current administration would welcome this change in buying because most products currently in the U.S. economy are partly from other countries. However, there are lots of reservations in the market created by trade barriers. Fears of government monopolization are well-founded. The private sector output would reduce, leaving consumers with no alternative.

Generally, there is an economic need to bring the US-EU trade dispute to an end. Chief executive of aerospace trade body ADS, Paul Everitt, has joined other leaders in urging the United States and E.U. to work together to resolve the trade dispute (Washington increases tariffs on aircraft after E.U. subsidy row, 2020). The United States does not show signs of backing down; this only mount pressure on E.U. to make compromises. Should the two sides hesitate to solve the dispute soon, a significant trade dispute is inevitable, and the effects could be catastrophic to the global economic development.

References

Amiti, M., Redding, S. J., & Weinstein, D. E. (2019). The Impact of the 2018 Tariffs on Prices and Welfare. Journal of Economic Perspectives, 33(4), 187-210.

Washington increases tariffs on aircraft after E.U. subsidy row (2020, February 15), BBC News. Retrieved from: https://www.bbc.com/news/uk-scotland-scotland-business-51514528