10 ms·

US set to impose tariffs on $7.5B of EU exports in Airbus row

148 points by dustinmoris 7y ago

deleted 7y ago
[deleted]
Xixi 7y ago
It seems that the EU could retaliate immediately, due to an old WTO win [1]. Though probably for a smaller amount, somewhere between $2.2bn and $5.0bn. And then of course there is the pending WTO final decision against Boeing/US expected I believe next year [2]. I don't think this will be a win for anyone... [1] https://leehamnews.com/2019/09/30/eu-can-retaliate-against-boeing-immediately-old-wto-win-outstanding/ https://leehamnews.com/2019/09/30/eu-can-retaliate-against-b... [2] https://www.dw.com/en/wto-rules-against-us-and-boeing-in-mammoth-trade-row-with-eu/a-48105904 https://www.dw.com/en/wto-rules-against-us-and-boeing-in-mam...
- ceejayoz 7y ago
  > I don't think this will be a win for anyone... Nobody wins in trade wars.
  - simion314 7y ago
    Politicians often do the wrong thing to score some points in the next elections.
    - magduf 7y ago
      Every nation gets the government it deserves.
      - jorge-d 7y ago
        That only works in case of democracies.
        vkou 7y ago
        Every dictator rules only with the assent of his subjects.
        magduf 7y ago
        Nope, it's true for every country (except for outright invasion and occupation, I'll give a country a pass on that). Short of an occupying force, every country has the ability to choose its own leaders. Non-democratic systems only exist because the people allow them to.
        jorge-d 7y ago
        Tell that to starving north-koreans.
        Zarath 7y ago
        Hey, they deserve it apparently
        magduf 7y ago
        They do, just like every nation does. The North Korean government persists, and does what it does, because it has the support of a majority of its people. No government, no matter how autocratic, can continue without popular support (or an occupying force, which is certainly not the case in NK). That's why the maxim is true.
        magduf 7y ago
        Lots of NKs are not starving. The military has literally millions of people in it, and they're well-fed. Do you think the regime would continue if this were not the case?
        toasterlovin 7y ago
        > Non-democratic systems only exist because the people allow them to. That is an extremely optimistic perspective.
      - vageli 7y ago
        Does that count when your government is undermined and overthrown by outsiders with more firepower than you? "I don't see why we have to let a country go Communist due to the irresponsibility of its own people." ~ Henry Kissinger on Chile in the 70s.
        magduf 7y ago
        No, I would say that's the one exception. It doesn't happen that often, though, in the big picture.
        deleted 7y ago
        [deleted]
    - bilbo0s 7y ago
      That's what I was thinking. It's not entirely accurate to say "nobody" wins. Politicians can definitely "win" in trade wars.
  - aivisol 7y ago
    Not that I support trade wars, but do we have evidence that really nobody wins in trade wars? Just out of curiosity.
    - jokoon 7y ago
      My first answer would be https://en.wikipedia.org/wiki/Comparative_advantage https://en.wikipedia.org/wiki/Comparative_advantage but I'm not sure it's directly related to trade wars.
    - jorge-d 7y ago
      The situation is a bit different now but 1930's Smoot–Hawley Tariff Act [1] seems like it was quite a lose/lose scenario. [1] https://en.wikipedia.org/wiki/Smoot–Hawley_Tariff_Act#After_enactment https://en.wikipedia.org/wiki/Smoot–Hawley_Tariff_Act#After_...
    - api_or_ipa 7y ago
      As another poster mentioned, when countries don't trade, they lose their comparative advantage in producing the products that they can produce most efficiently. With free trade, countries can focus on building the products that they're most efficient at producing. Now, it's important to bring that with free trade, the distribution of benefits is not equal. Those who produce a product that is now competitive in the global market stand to gain. Those who produce products that now face cheaper foreign competition stand to lose. It can be shown that the gains are always larger than the losses, but there may not be an effective mechanism to re-distribute the benefits and losses so that everyone wins. This is known as Kaldor-Hicks efficiency.
      - mistermann 7y ago
        International trade and trade wars are two different things though. If one country conducts their trade in an unfair manner and won't stop until another country retaliates, after which they both trade fairly, this would be just one an example of an effective trade war. Whether any of this is happening today is very complex and seems to come down to a matter of opinion, especially since almost no one has sat down and really looked at the numbers and issues in depth.
  - Zarath 7y ago
    Is a boycott a form of trade war? What about an embargo? I'm surprised you can make such a sweeping statement. Frankly I don't think things are as simple as "free markets" since they don't really exist. Companies are also political entities, exercising power in the real, physical world. Not some idealized vacuum market. What if we imposed tariffs on Chinese products that contain high amounts of lead? Does nobody win then? Suppose further that such a tariff hinders the expansion of companies who put high amounts of lead in their products, allowing a company who does not use lead to gain a supply chain and infrastructure advantage in these "expanded areas". Is nobody winning then?
    - ineedasername 7y ago
      >"What if we imposed tariffs on Chinese products that contain high amounts of lead? Does nobody win then?" It's a poor example because that's not how products containing dangerous levels of a substance are dealt with. None of this recent trade war back & forth has imposed tariffs on any products for any reason resembling this. Even if they did, the answer is still "no", we don't win by simply making dangerous or deadly items more expensive. We ban them. When toys from China were found to have lead paint a few years ago, which violates US law, we didn't put tariffs on those toys, we put out public alerts and recall notices. If we do start putting tariffs on, say, vaping products from China because we believe they are dangerous, then maybe there would be a good comparison. However, even then, we could simply tax them locally instead of instituting an international tariff that would provoke trade tensions, so we still wouldn't "win" compared to available alternatives. Maybe there have been examples of winning a trade war via tariffs, but I'm not aware of them, and history is littered with losses. [0] [0]https://www.ft.com/content/ed1a5480-38c9-11e8-8b98-2f31af407cc8 https://www.ft.com/content/ed1a5480-38c9-11e8-8b98-2f31af407...
      - microcolonel 7y ago
        > It's a poor example because that's not how products containing dangerous levels of a substance are dealt with. Well, it would actually be interesting, given that various RoHS-style approaches seem to rely entirely on bans and labelling requirements. Fees would be an interesting middle ground for things that can't be banned for product quality† reasons, but for which labelling is not a sufficient deterrent for low-value uses of hazardous substances. added: † Lead is a very useful material. In many cases, using lead instead of alternatives in a product can dramatically improve consumer safety. For example, lead solder is more ductile than lead-free solder; in a product that vibrates, lead solder can dramatically improve the useful life of a product, as far as I've been told. Furthermore, the higher temperatures required to make joints with lead-free solder increase the failure rate of components being soldered.
  - mieseratte 7y ago
    > Nobody wins in trade wars. I would consider upholding higher-order principles to be a win.
  - sushid 7y ago
    How do you define a trade “war?” Is it simply affecting free trade in some shape or form? If so does devaluating your own currency or propping up industries via government backed loans count? I’d argue that these initiatives affect trade and force other governments to enact their own measures. And of course, there are winners and losers.
ineedasername 7y ago
Boeing has received approximately $90 billion in subsidies since 2000, from local, state and federal sources in the form of taxes, grants, and loan guarantees. [0] [0] subsidytracker.goodjobsfirst.org/parent/boeing
- defertoreptar 7y ago
  The question is not if there are subsidies, but whether they are legal subsidies. > “The WTO has now rejected every allegation of unlawful subsidies to Boeing with the single exception of one measure—a Washington State business and occupancy (B&O) tax rate. Boeing has pledged from the beginning of this case to comply with the WTO’s rulings, and the B&O tax rate will be no exception. Boeing will support the United States and Washington State as they take steps necessary to fully comply with today’s ruling. > In 2006, after attempts to negotiate a bilateral agreement, the U.S. Government (USG) filed a case with the World Trade Organization claiming Airbus had received $22 billion in illegal subsidies. U.S. officials estimated the economic benefit of those subsidies (in 2006 dollars) at more than $200 billion. http://www.boeing.com/company/key-orgs/government-operations/wto.page http://www.boeing.com/company/key-orgs/government-operations...
  - vernie 7y ago
    Both are questions.
    - deleted 7y ago
      [deleted]
  - ineedasername 7y ago
    Citing Boeing on this isn't really going to get a good answer, of course they think it's an illegal subsidy. You need to define illegal though. The general interpretation of the issue states that allowable subsidies are, "those which are applied to research and pre-competitive development activities, and others which assist disadvantaged regions" [0] Tens of billions of dollars in tax breaks and loan guarantees doesn't really seem like it could all fit under that definition, and indeed it looks likely that the WTO will rule that way as well. The main problem with this case isn't just that AirBus received illegal subsidies. That can be true at the same time that Boeing also received them, making this a somewhat ridiculous thing to argue about, for Boeing to claim to be the aggrieved party here when any grievance or disadvantage has been offset by their own subsidies. The end result will be additional tariffs imposed in both directions, making consumers pay more, at a time that tariffs and trade wars exacerbate a minor economic slowdown, increasing the chance that it will turn into something more. [0] https://www.thefreelibrary.com/Trade+Liberalization+Under+the+GATT%2C+the+NAFTA+and+the+EU%3A+Selected+...-a078738322 https://www.thefreelibrary.com/Trade+Liberalization+Under+th...
Tepix 7y ago
Could increased tariffs be a win for the environment? More locally sourced goods means less wasteful transports...
- dhimes 7y ago
  If it was anything other than airplanes maybe.
- NTDF9 7y ago
  As much as it seems so, it's not environmentally efficient. This is because the same raw materials would have to be extracted at multiple places, more people would have to work at similar factories, producing similar goods. Effectively, the world will be making the same 7 billion shoes except that shoe manufacturing infrastructure+supply chains+transportations will have to be made everywhere, thus expediting environmental degradation. A lot of extra work will be done to find the same efficiencies everywhere. Shipping for 7 billion people is actually very efficient.
- jccooper 7y ago
  ...and more wasteful manufacturing. There's usually a reason products are shipped.
mrtksn 7y ago
Aren’t the production lines of Airbus and Boing booked for many years ahead? Isn’t this why airlines put up with the 737-MAX fiasco? Then, aren’t these tariffs simply a tax on the consumers?
- salex89 7y ago
  True... But with the 737 saga continuing, and there is no Boeing successor in sight, and you ain't gonna buy any Airbus soon, I personally believe there are influences in some airlines to actually think about switching. It isn't going to be easy but you've got a lot of time on our hands anyway. This taxes might make just that bit more difficult.
- _ph_ 7y ago
  Right. The tariffs mean that American airlines have to pay more for Airbus machines, especially for those they already ordered. And of course, with things being as they are, Airbus has little incentive to lower prices, as they have such a big backlog.
resters 7y ago
Queue the HN cheerleaders for tariffs. Not sure why everyone seems to think politicians meddling in the economy is a good thing (subsidies or tariffs).
- Zarath 7y ago
  As opposed to not meddling? Has that ever happened in the history of government? Economics and politics are tightly coupled.
- mtnGoat 7y ago
  excellent idea, but that would require ALL politicians do the same. sometimes retaliation is necessary, when some dont play with the same rule set as the rest.
- deleted 7y ago
  [deleted]
- spamizbad 7y ago
  HN has tariff cheerleaders?
- onepointsixC 7y ago
  ...these are tariffs explicitly allowed by the WTO in retaliation to politicians meddling in the global economy in the form of illegal subsidies.
v4dok 7y ago
Tarifs on airbus the moment Boeing is doing that bad with the 737 fiasco seem more than "happy news" to the Boeing's shareholders. I call that effective lobbying. What is astonishing however is how Trump is so willingly trading the relatively stable economic environment with EU for another trade war front.
zarro 7y ago
The short term "necessities" for tariffs aside, I don't see why in the long run we shouldn't be working toward eliminating all tariffs to begin with. The argument: -The US consumer buys $100B in Japanese products. -Japan consumers buys $50B in US products. US cries: We spent $50B more on your products, you MUST buy ours or we will raise tariffs. How is that fair? I provide you with a product you wanted, and now instead of being allowed the same courtesy I have to chose between accepting a product back I don't want, or being hurt on my ability to reach my customer base? It just seems like a mechanism for less productive producers to cheat by using the government to show arbitrary favoritism instead of actually working on improving their product(s) to service ALL their customers better.

148 points by dustinmoris 7y ago

deleted 7y ago

[deleted]

Xixi 7y ago

It seems that the EU could retaliate immediately, due to an old WTO win [1]. Though probably for a smaller amount, somewhere between $2.2bn and $5.0bn. And then of course there is the pending WTO final decision against Boeing/US expected I believe next year [2]. I don't think this will be a win for anyone... [1] https://leehamnews.com/2019/09/30/eu-can-retaliate-against-boeing-immediately-old-wto-win-outstanding/ https://leehamnews.com/2019/09/30/eu-can-retaliate-against-b... [2] https://www.dw.com/en/wto-rules-against-us-and-boeing-in-mammoth-trade-row-with-eu/a-48105904 https://www.dw.com/en/wto-rules-against-us-and-boeing-in-mam...

ceejayoz 7y ago
> I don't think this will be a win for anyone... Nobody wins in trade wars.
- simion314 7y ago
  Politicians often do the wrong thing to score some points in the next elections.
  - magduf 7y ago
    Every nation gets the government it deserves.
    - jorge-d 7y ago
      That only works in case of democracies.
      - vkou 7y ago
        Every dictator rules only with the assent of his subjects.
      - magduf 7y ago
        Nope, it's true for every country (except for outright invasion and occupation, I'll give a country a pass on that). Short of an occupying force, every country has the ability to choose its own leaders. Non-democratic systems only exist because the people allow them to.
        jorge-d 7y ago
        Tell that to starving north-koreans.
        Zarath 7y ago
        Hey, they deserve it apparently
        magduf 7y ago
        They do, just like every nation does. The North Korean government persists, and does what it does, because it has the support of a majority of its people. No government, no matter how autocratic, can continue without popular support (or an occupying force, which is certainly not the case in NK). That's why the maxim is true.
        magduf 7y ago
        Lots of NKs are not starving. The military has literally millions of people in it, and they're well-fed. Do you think the regime would continue if this were not the case?
        toasterlovin 7y ago
        > Non-democratic systems only exist because the people allow them to. That is an extremely optimistic perspective.
    - vageli 7y ago
      Does that count when your government is undermined and overthrown by outsiders with more firepower than you? "I don't see why we have to let a country go Communist due to the irresponsibility of its own people." ~ Henry Kissinger on Chile in the 70s.
      - magduf 7y ago
        No, I would say that's the one exception. It doesn't happen that often, though, in the big picture.
        deleted 7y ago
        [deleted]
  - bilbo0s 7y ago
    That's what I was thinking. It's not entirely accurate to say "nobody" wins. Politicians can definitely "win" in trade wars.
- aivisol 7y ago
  Not that I support trade wars, but do we have evidence that really nobody wins in trade wars? Just out of curiosity.
  - jokoon 7y ago
    My first answer would be https://en.wikipedia.org/wiki/Comparative_advantage https://en.wikipedia.org/wiki/Comparative_advantage but I'm not sure it's directly related to trade wars.
  - jorge-d 7y ago
    The situation is a bit different now but 1930's Smoot–Hawley Tariff Act [1] seems like it was quite a lose/lose scenario. [1] https://en.wikipedia.org/wiki/Smoot–Hawley_Tariff_Act#After_enactment https://en.wikipedia.org/wiki/Smoot–Hawley_Tariff_Act#After_...
  - api_or_ipa 7y ago
    As another poster mentioned, when countries don't trade, they lose their comparative advantage in producing the products that they can produce most efficiently. With free trade, countries can focus on building the products that they're most efficient at producing. Now, it's important to bring that with free trade, the distribution of benefits is not equal. Those who produce a product that is now competitive in the global market stand to gain. Those who produce products that now face cheaper foreign competition stand to lose. It can be shown that the gains are always larger than the losses, but there may not be an effective mechanism to re-distribute the benefits and losses so that everyone wins. This is known as Kaldor-Hicks efficiency.
    - mistermann 7y ago
      International trade and trade wars are two different things though. If one country conducts their trade in an unfair manner and won't stop until another country retaliates, after which they both trade fairly, this would be just one an example of an effective trade war. Whether any of this is happening today is very complex and seems to come down to a matter of opinion, especially since almost no one has sat down and really looked at the numbers and issues in depth.
- Zarath 7y ago
  Is a boycott a form of trade war? What about an embargo? I'm surprised you can make such a sweeping statement. Frankly I don't think things are as simple as "free markets" since they don't really exist. Companies are also political entities, exercising power in the real, physical world. Not some idealized vacuum market. What if we imposed tariffs on Chinese products that contain high amounts of lead? Does nobody win then? Suppose further that such a tariff hinders the expansion of companies who put high amounts of lead in their products, allowing a company who does not use lead to gain a supply chain and infrastructure advantage in these "expanded areas". Is nobody winning then?
  - ineedasername 7y ago
    >"What if we imposed tariffs on Chinese products that contain high amounts of lead? Does nobody win then?" It's a poor example because that's not how products containing dangerous levels of a substance are dealt with. None of this recent trade war back & forth has imposed tariffs on any products for any reason resembling this. Even if they did, the answer is still "no", we don't win by simply making dangerous or deadly items more expensive. We ban them. When toys from China were found to have lead paint a few years ago, which violates US law, we didn't put tariffs on those toys, we put out public alerts and recall notices. If we do start putting tariffs on, say, vaping products from China because we believe they are dangerous, then maybe there would be a good comparison. However, even then, we could simply tax them locally instead of instituting an international tariff that would provoke trade tensions, so we still wouldn't "win" compared to available alternatives. Maybe there have been examples of winning a trade war via tariffs, but I'm not aware of them, and history is littered with losses. [0] [0]https://www.ft.com/content/ed1a5480-38c9-11e8-8b98-2f31af407cc8 https://www.ft.com/content/ed1a5480-38c9-11e8-8b98-2f31af407...
    - microcolonel 7y ago
      > It's a poor example because that's not how products containing dangerous levels of a substance are dealt with. Well, it would actually be interesting, given that various RoHS-style approaches seem to rely entirely on bans and labelling requirements. Fees would be an interesting middle ground for things that can't be banned for product quality† reasons, but for which labelling is not a sufficient deterrent for low-value uses of hazardous substances. added: † Lead is a very useful material. In many cases, using lead instead of alternatives in a product can dramatically improve consumer safety. For example, lead solder is more ductile than lead-free solder; in a product that vibrates, lead solder can dramatically improve the useful life of a product, as far as I've been told. Furthermore, the higher temperatures required to make joints with lead-free solder increase the failure rate of components being soldered.
- mieseratte 7y ago
  > Nobody wins in trade wars. I would consider upholding higher-order principles to be a win.
- sushid 7y ago
  How do you define a trade “war?” Is it simply affecting free trade in some shape or form? If so does devaluating your own currency or propping up industries via government backed loans count? I’d argue that these initiatives affect trade and force other governments to enact their own measures. And of course, there are winners and losers.

ineedasername 7y ago

Boeing has received approximately $90 billion in subsidies since 2000, from local, state and federal sources in the form of taxes, grants, and loan guarantees. [0] [0] subsidytracker.goodjobsfirst.org/parent/boeing

defertoreptar 7y ago
The question is not if there are subsidies, but whether they are legal subsidies. > “The WTO has now rejected every allegation of unlawful subsidies to Boeing with the single exception of one measure—a Washington State business and occupancy (B&O) tax rate. Boeing has pledged from the beginning of this case to comply with the WTO’s rulings, and the B&O tax rate will be no exception. Boeing will support the United States and Washington State as they take steps necessary to fully comply with today’s ruling. > In 2006, after attempts to negotiate a bilateral agreement, the U.S. Government (USG) filed a case with the World Trade Organization claiming Airbus had received $22 billion in illegal subsidies. U.S. officials estimated the economic benefit of those subsidies (in 2006 dollars) at more than $200 billion. http://www.boeing.com/company/key-orgs/government-operations/wto.page http://www.boeing.com/company/key-orgs/government-operations...
- vernie 7y ago
  Both are questions.
  - deleted 7y ago
    [deleted]
- ineedasername 7y ago
  Citing Boeing on this isn't really going to get a good answer, of course they think it's an illegal subsidy. You need to define illegal though. The general interpretation of the issue states that allowable subsidies are, "those which are applied to research and pre-competitive development activities, and others which assist disadvantaged regions" [0] Tens of billions of dollars in tax breaks and loan guarantees doesn't really seem like it could all fit under that definition, and indeed it looks likely that the WTO will rule that way as well. The main problem with this case isn't just that AirBus received illegal subsidies. That can be true at the same time that Boeing also received them, making this a somewhat ridiculous thing to argue about, for Boeing to claim to be the aggrieved party here when any grievance or disadvantage has been offset by their own subsidies. The end result will be additional tariffs imposed in both directions, making consumers pay more, at a time that tariffs and trade wars exacerbate a minor economic slowdown, increasing the chance that it will turn into something more. [0] https://www.thefreelibrary.com/Trade+Liberalization+Under+the+GATT%2C+the+NAFTA+and+the+EU%3A+Selected+...-a078738322 https://www.thefreelibrary.com/Trade+Liberalization+Under+th...

Tepix 7y ago

Could increased tariffs be a win for the environment? More locally sourced goods means less wasteful transports...

dhimes 7y ago
If it was anything other than airplanes maybe.
NTDF9 7y ago
As much as it seems so, it's not environmentally efficient. This is because the same raw materials would have to be extracted at multiple places, more people would have to work at similar factories, producing similar goods. Effectively, the world will be making the same 7 billion shoes except that shoe manufacturing infrastructure+supply chains+transportations will have to be made everywhere, thus expediting environmental degradation. A lot of extra work will be done to find the same efficiencies everywhere. Shipping for 7 billion people is actually very efficient.
jccooper 7y ago
...and more wasteful manufacturing. There's usually a reason products are shipped.

mrtksn 7y ago

Aren’t the production lines of Airbus and Boing booked for many years ahead? Isn’t this why airlines put up with the 737-MAX fiasco? Then, aren’t these tariffs simply a tax on the consumers?

salex89 7y ago
True... But with the 737 saga continuing, and there is no Boeing successor in sight, and you ain't gonna buy any Airbus soon, I personally believe there are influences in some airlines to actually think about switching. It isn't going to be easy but you've got a lot of time on our hands anyway. This taxes might make just that bit more difficult.
_ph_ 7y ago
Right. The tariffs mean that American airlines have to pay more for Airbus machines, especially for those they already ordered. And of course, with things being as they are, Airbus has little incentive to lower prices, as they have such a big backlog.

resters 7y ago

Queue the HN cheerleaders for tariffs. Not sure why everyone seems to think politicians meddling in the economy is a good thing (subsidies or tariffs).

Zarath 7y ago
As opposed to not meddling? Has that ever happened in the history of government? Economics and politics are tightly coupled.
mtnGoat 7y ago
excellent idea, but that would require ALL politicians do the same. sometimes retaliation is necessary, when some dont play with the same rule set as the rest.
deleted 7y ago
[deleted]
spamizbad 7y ago
HN has tariff cheerleaders?
onepointsixC 7y ago
...these are tariffs explicitly allowed by the WTO in retaliation to politicians meddling in the global economy in the form of illegal subsidies.

v4dok 7y ago

Tarifs on airbus the moment Boeing is doing that bad with the 737 fiasco seem more than "happy news" to the Boeing's shareholders. I call that effective lobbying. What is astonishing however is how Trump is so willingly trading the relatively stable economic environment with EU for another trade war front.

zarro 7y ago

The short term "necessities" for tariffs aside, I don't see why in the long run we shouldn't be working toward eliminating all tariffs to begin with. The argument: -The US consumer buys $100B in Japanese products. -Japan consumers buys $50B in US products. US cries: We spent $50B more on your products, you MUST buy ours or we will raise tariffs. How is that fair? I provide you with a product you wanted, and now instead of being allowed the same courtesy I have to chose between accepting a product back I don't want, or being hurt on my ability to reach my customer base? It just seems like a mechanism for less productive producers to cheat by using the government to show arbitrary favoritism instead of actually working on improving their product(s) to service ALL their customers better.