Image source:
What's going on?
The US has threatened Europe with more tariffs on products worth $4 billion, including Scotch whisky and Italian cheese. That probably wont reduce Americans pizza consumption, though
What does this mean?
The beef on this slice of the global trade dispute stems from subsidies that America and Europe offer their respective aircraft manufacturers, Boeing and Airbus. The ideas that government support encourages innovation, helping them to be globally competitive. And the governments get some of that back through taxes and the contributions these companies make to growing the economy.
The US has argued that Airbuss subsidies arent legal and cost America $11 billion a year. But Boeings received illegal subsidies from Uncle Sam too and Europes not happy about it. The USs proposed tariffs are awaiting approval… and Europes own counter-tariffs are too. Last months Paris Air Show in which orders for Airbuss planes soared past those for Boeings probably only added fuel to the fire.
Why should I care?
The bigger picture: Europe cant catch a break.
The US and China agreed to pull their trade punches last weekend, but Europe had no such luck. The European Union did sign its biggest trade deal ever, with major South American countries as well as one with Vietnam. But while the eurozones economic data remains weak, itll likely want to make up with the US and avoid further trade disruption. Still, a wee dram may numb the pain.
For markets: The enemy of my enemy
Airbus and Boeings shares descended on Tuesday, perhaps as any resolution may involve both losing some government support. Global companies headquartered in Europe that fear becoming tariff targets may follow in the footsteps of AB InBev, the worlds largest brewer. Its focusing on Asia, selling shares of its business there in the years biggest initial public offering so far to help fund expansion plans in the region (tweet this). We hear beer goes well with pizza
Originally posted as part of the Finimize daily email.
The top 2 financial news stories in 3 minutes. Join over one million Finimizers