Pay up EU! Trump offers trade war truce if European Airbus repays billions in state aid

US officials said they were willing to settle the long-running aircraft subsidy row if plane manufacturer Airbus paid back billions it received in handouts from European governments. But Brussels has bristled at the truce offer and instead is plotting to retaliate with £3.11bn worth of tariffs on imports from the US.

They don’t want to do it

Donald Trump

Donald Trump, who is hoping to be re-elected when America goes to the polls next month, has vowed to “strike back harder” if the EU goes ahead with its plan and warned: “They don’t want to do it.”

But one Brussels insider described the US proposal as “insulting” and said it could accelerate the tariff war.

And French Finance Minister Bruno Le Maire said he wanted Europe to slap tariffs on US goods after the World Trade Organisation (WTO) gave Brussels the green light to retaliate against US subsidies for planemaker Boeing.

Mr Le Maire said: “The EU has the possibility to impose sanctions on the United States in relation to the spat between Boeing and Airbus. It must decide to do so.”

Donald Trump has offered a trade war truce but threatened to ‘strike hard’ if the EU imposes tariffs (Image: GETTY)

The WTO had already ruled that European government loans to Airbus were unfairly subsidised through low interest rates but also found Boeing had received unfair support from tax breaks from Washington.

The warring parties both insist they have fixed past flaws and are now back in line with WTO rules.

The loans stand at the centre of a dispute that has dragged on for 16 years and hit trade relations in sectors ranging from luxury goods to agriculture as the two sides seek to punish each other’s aircraft subsidies with tariffs.

READ MORE: Brexit LIVE: 45 years as member and not even the same terms as Canada!

French finance minister Bruno Le Maire wants the EU to slap tariffs on US imports (Image: GETTY)

Washington said Airbus should pay back billions in state aid (Image: GETTY)

Under the US offer, interest rates on past loans to support Airbus development programmes would be reset to a level that assumed only half the projects would succeed.

That would mean a higher risk than Airbus partner nations – Britain, France, Germany and Spain – have traditionally priced into the loans and reflects a speculative type of investment.

But the move could cost Airbus up to £7.77bn – a figure branded as unacceptable to the while aircraft manufacturers seek extra funding to survive the coronavirus crisis.

A US source said Washington was “serious” about getting Airbus to repay aid.

Jamieson Greer, former chief of staff to US trade chief Robert Lighthizer, said any deal must involve some form of subsidy payback by Airbus.

He said: “Mr Lighthizer has been very public on the basic principle that some form of restitution is an important part of any resolution.”

European sources say Boeing would also have to hand back billions if the same philosophy were applied to the US planemaker.

Airbus only repays state loans when its sales exceed a certain threshold, while loans for weak-selling planes such as the A380 superjumbo can be written off.

Airbus said the disputed system favoured taxpayers because loan repayments on successful jets such as the A320 far outweighed amounts written off on jets that failed to reach sales targets.