Boeing bracing for potential trade war between US and China

Boeing is assessing the potential damages in case it finds itself at the center of of a trade war between the United States and China, after the two countries announced they would impose new tariffs on each other’s imports.

Image : Boeing

It was the White House that shot first. On June 15, 2018, the Trump administration announced it would impose a 25% on Chinese imported goods, for a total worth of USD 50 billion per year. A first round of tariffs on 800 products worth USD 34 billion would come into effect as early as July 6, 2018, with the remaining tariffs on USD 16 billion of products to be applied later. The affected goods include aircraft parts.

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The Chinese government retaliated in a similar manner the same day, saying that a USD 34 billion worth of U.S. goods, including agriculture products and cars, would be also subject to a first series of tariffs with another USD 16 billion to be affected later.

With orders pending for several Chinese airlines, Boeing is bracing for the consequences of a trade war. “We are currently assessing the impact of these tariffs and the retaliatory measures they may have on our supply chain and our civil aviation business,” said Boeing spokesman Charles Bickers in an email to AFP. In 2017, the Chinese market accounted for 12.8% of Boeing revenue (followed by Europe with 12.3%).

China is preparing countermeasures to U.S. tariffs in response of President Trump’s imposed steel and aluminum tariffs thought to be mainly directed at China. Analytics say that the likely target may be the U.S. aircraft manufacturer Boeing which delivers approximately 20% of their export to China.

However, it seems highly unlikely that the government would impose tariffs on Boeing products. With the surge in passenger numbers in China, the national companies which are partially stated-owned could not rely on the limited assembly output of Comac or the already packed backlog of Airbus to provide aircraft soon enough to support the airlines’ growth.

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Following the resumption of hostilities between China and the United States on June 15, 2018, Boeing declared“We will continue to engage with leaders in both countries to urge a productive dialogue to resolve trade differences, highlighting the mutual economic benefits of a strong and prosperous aerospace industry”.