A World Trade Organization (WTO) arbitration decision on Wednesday will allow President Trump to impose tariffs on up to $7.5 billion in European products, laying the groundwork for a sharp escalation in trade tensions between the U.S. and EU.
The decision will allow Trump to target crucial European agricultural exports with tariffs. Top EU officials have pledged to retaliate with their own tariffs on U.S. products, which may increase the deepening economic damage of Trump’s trade battles.
The WTO’s ruling Wednesday settles a 2004 case in which the U.S. accused the EU of providing unfair subsidies to Airbus, the continent’s top aerospace company. A WTO panel ruled in favor of the U.S. in 2011, and an arbitrator announced the approved level of retaliation Wednesday.
While Trump has long complained about the effectiveness of the WTO, the regulator’s decision Wednesday gives the president a powerful, but risky weapon in his trade dispute with Europe.
Trump has frequently accused the EU and major European powers of bilking the U.S. in global trade. The president has also rejected the idea of teaming up with stalwart European allies to check China’s alleged trade abuses, accusing the EU of cheating the U.S. just as badly.
As the EU braces for recessions across the continent and the potential damage of a hard Brexit, new U.S. tariffs pose a major threat to the European economy.
Trump is likely to impose tariffs on a slew of EU products, including cheeses, wines, aircraft and other essential exports. The president is also considering tariffs of up to 25 percent on foreign automobiles and auto parts, which experts say could be devastating for the continent.
The EU auto industry supports 12.6 million jobs, roughly 6 percent of the EU’s working population, and drives 4 percent of the union’s gross domestic product, according to data compiled by the Atlantic Council think tank.
Roughly 29 percent of EU car exports by value go to the U.S.