A trade war between the U.S. and EU could be on the horizon after the U.S. imposed tariffs on European goods – a fresh sign that the global economy could be heading for a recession.
Regarding the possibility, Arancha Gonzalez, the Executive Director of the International Trade Centre (ITC), warned the US and EU. She argued that another trade war between two economic giants would make a major recession unavoidable.
“It means straight into a recession. All of this is pointing in one direction. If we keep digging into that same hole, we will be looking into a major recession,” Gonzales told CNBC interviewer on Wednesday.
The European Commission, which supervises trade policy for the EU, has requested negotiations with Washington to settle the dispute. Also, the commission wishes that both parties do not resort to tariffs.
The dispute began when the EU illegally helped European aerospace company Airbus, a direct competitor of US’ Boeing. As a countermeasure, the US received permission from the World Trade Organization (WTO) to impose additional tariffs on about $7.5 billion worth of European goods.
“What we fundamentally know is that tariffs do not solve the underlining problem that exists in international trade. What would make sense is everybody that produces planes sitting around the table to figure out how do they strengthen anti-subsidies rules, how do they ensure fairer competition in the aircraft sector – given that they all cheat at the moment,” Gonzales added.
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WTO Gives US Permission to Impose Tariffs on EU
On Monday, WTO officially permitted the US to impose tariffs on the EU. The meeting reportedly did not last more than 20 minutes.
According to the schedule, the USD 7.5 billion worth of tariffs would take effect on October 18, which would target various European products such as wine and cheese.
However, US trade ambassador Dennis Shea stated that this is not final. He said the US still prefers a solution coming from negotiations.
“But that can only happen if the EU genuinely terminates the benefits to Airbus from current subsidies and ensures that subsidies to Airbus cannot be revived under another name or another mechanism,” said Shea.
Meanwhile, the EU delegation expressed serious concern over the meeting and its conclusion, perceiving such tariffs as a short-sighted policy.
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