BRUSSELS — President Biden on Tuesday announced the end of a bitter, 17-year dispute with the European Union over aircraft subsidies for Boeing and Airbus, suspending the threat of billions of dollars in punitive tariffs on each other’s economies for five years.
The breakthrough came as Mr. Biden prepared to meet top European leaders in a U.S.-E.U. summit meeting. European officials said that two days of negotiations in Brussels between Katherine Tai, the U.S. trade representative, and Valdis Dombrovskis, the E.U. trade commissioner, had finally produced an agreement that member countries approved overnight.
In a briefing for reporters, Ms. Tai said that both sides had agreed to extend a suspension of tariffs for another five years while working together to counter China’s investment in the aircraft sector.
But she said the agreement set limits on the subsidies that the European Union would be allowed to provide to Airbus, and she warned that the United States would reimpose billions of dollars in tariffs if subsidies by European Union countries crossed a “red line.”
“These tariffs will remain suspended, so long as E.U. support for Airbus is consistent with the terms of this agreement,” she said. “Should E.U. support cross the red line, and U.S. producers are not able to compete fairly and on a level playing field, the United States retains the flexibility to reactivate the tariffs that are being suspended.”
The agreement means that significant punitive tariffs estimated at $11.5 billion, on a wide range of products including wine, tractors, spirits, molasses and cheese, will continue to be suspended after both sides had agreed to do so in March while they tried to settle the dispute.
The dispute between Airbus and Boeing over illegal state subsidies goes back nearly two decades. In 2019, the World Trade Organization ruled that the European Union had illegally provided support to Airbus, clearing the way for Washington to respond with tariffs worth up to $7.5 billion in annual trade.
About a year later, in a parallel case, it ruled that the U.S. benefits to Boeing also violated trade rules, authorizing the Brussels to hit the United States with annual tariffs worth roughly $4 billion.
Ms. Tai described the new agreement as part of Mr. Biden’s effort to conduct what he has called “a foreign policy for the middle class.” She said resolving the dispute would protect 1.2 million jobs in the aerospace sector and related industries.
“The president routinely says that we are strongest when we work with our friends and allies,” she said. “Supporting Boeing means supporting good paying jobs and a strong supply chain here at home.”
Mr. Biden has promised to ease trade tensions with allies, and his decision to meet with the top European Union officials, Ursula von der Leyen, president of the European Commission, and Charles Michel, president of the European Council of member states, was highly appreciated here.
At the Group of 7 summit meeting in Britain, sitting with President Emmanuel Macron of France, Mr. Biden lavished praise on the European Union. “I for one think that the European Union is an incredibly strong and vibrant entity, that has a lot to do with the ability of Western Europe not only to handle its economic issues but provide the backbone and support for NATO,” Mr. Biden said.
That is a marked change from the expressed views of former President Donald J. Trump, who considered the European Union an “economic foe” and competitor and derided NATO members as free-riders on American military spending.
In some ways, the European Union, given its enormous economic power as a market and as a trading bloc, has more impact on American life than any other multilateral institution. Mr. Biden wants more support from the Europeans on restraining the damaging effects of the rise of China, with whom the Europeans do a significant amount of trade.
Major countries like Germany, France and Italy are reluctant to join Washington in an adversarial relationship with China, but attitudes are hardening because of Chinese human rights abuses at home, dodgy trade practices and widespread industrial espionage. The European Union, for instance, has agreed on a voluntary investment screening program similar in concept to the American interagency committee on foreign investment known as CFIUS.
There remain other significant disputes between the United States and the European Union, most prominently another lingering case over Trump-era tariffs on steel and aluminum. Mr. Trump used special “national security” provisions to impose the tariffs, which set off a larger trade war.
The European Union retaliated by targeting some $3.4 billion of American imports with tariffs on a range of big-brand products, including Harley-Davidson Inc. motorcycles, Levi Strauss & Co. jeans and bourbon whiskey.
Brussels suspended its retaliatory tariffs in May, hoping to negotiate a longer-term solution with Mr. Biden and his administration on the problem of steel overcapacity worldwide.
Mr. Dombrovskis has urged Mr. Biden to “walk the talk” of comity and drop those tariffs.
The two sides are also discussing other complicated issues like trans-Atlantic data flows and digital privacy, carbon border taxes and digital taxes.
They also agreed to establish a new Trade and Technology Council to more formally consult on trade and technical standards. Part of the idea is to agree on how to limit Chinese digital ambitions in fields like artificial intelligence and cybersecurity and screen Chinese investments in those areas that could have security implications for Europe and the United States.
A senior American official said that the council would be an interagency body to coordinate with Brussels in priority areas like standards for artificial intelligence, quantum computing and biotechnology, coordination of supply chain resilience and investment screening and export controls.
Dealing with China’s nonmarket practices, its economic abuses, and its efforts to shape the rules of the road on technology for the 21st century, the official said, would be central to the work of the council.
A European Union official said that standards are complicated because systems differ, but cited issues like 5G infrastructure (read Huawei) and semiconductors that could be topics for the council to discuss.