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Is Boeing in Trouble Over Trump's Tariffs?

March 23, 2018
2 min read
Is Boeing in Trouble Over Trump's Tariffs?
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Among threats of a trade war over President Trump's recently enacted aluminum and steel tariffs for China, aircraft manufacturer Boeing Co.'s stock is taking a significant hit.

The American plane maker is poised for its worst month on the market in nearly two years, Bloomberg reports. The drop in stock prices comes amid fears that demand for Boeing's planes would sink with US-China trade tensions.

The Trump Administration announced Thursday it would hit China with a $60 billion tariff on Chinese goods. After the announcement, the Dow Jones Industrial average fell more than 700 points, led by Boeing, whose stock dropped 5% on Thursday. Boeing, which was up 15% earlier in March and added 316.5 points to the Dow in 2018, fell 9.2% over the last month as Trump was mulling and enacting the tariffs, leading many analysts to speculate if Boeing is the first victim in a US-China trade war.

Although experts told TPG the tariffs likely wouldn't affect airfares, at least not for several years, an impending trade war is making investors, manufacturers and airlines nervous. Boeing sells a significant portion of its aircraft to China. At the end of 2017, Boeing signed a deal to sell 300 planes worth $37 billion to a Chinese aviation group. (The deal was actually announced by Trump during a state visit to China). Boeing also recently predicted that China would buy 7,240 commercial aircraft worth $1.1 trillion between 2036.

Airlines could also be affected if passengers become less interested in flying between the US and China. Analysts told Skift that tariffs usually are an "incremental negative for travel demand." United Airlines has the most routes from the US to China and could be the most affected American carrier. The airline flies to Chengdu, Beijing and Shanghai. It cut routes to Xi’an and Hangzhou due to lack of demand.

Chinese airlines could face similar challenges if a trade war does take hold. “We are concerned,” Zhihang Chi, Air China’s vice president and general manager for North America told Skift. “There’s no other way to put it.”

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