This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. For an explanation of our Advertising Policy, visit this page.
Boeing’s stock is sliding yet again due to fears of a trade war, this time because China hit the US with new tariffs that in part target the American aircraft manufacturing industry.
The US airplane manufacturer’s shares fell by more than 4% as trading opened on Wednesday, and are down about 2% at 2pm New York time, following the announcement that China was slapping $50 billion worth of tariffs on 106 US goods, including “aircraft and other aircraft with an empty weight of more than 15,000 kg but not exceeding 45,000 kg [about 16.5 to 49.6 tons].”
It remains uncertain which Boeing aircraft the 25% tariff would specifically affect. The proposed weight range would include Boeing’s older 737s, but it remains unknown whether Boeing’s newer 737 MAX planes that are just being built and entering service would be affected. The Chinese trade officials’ definition of “empty weight” is not clear — specifically whether they mean operating empty weight, which accounts for crew and some equipment, or the manufacturer’s empty weight, which means solely the aircraft.
Depending on the definition, different Boeing 737 MAX aircraft might be affected.
Industry analysts told The Financial Times that they predicted only Boeing’s smallest new single-aisle jet, the 737 MAX 7, would be affected by the proposed 25% levy, and there are currently no Chinese orders for this jet. Flight Global reported in 2017 that all 65 orders for the MAX 7 were from carriers in North America. Boeing’s website says it has 273 unfulfilled orders from China for 737s, 27 of which are for older 737s, while 246 are for the newer 737 MAX aircraft (although it doesn’t differentiate which types of the MAX).
Other experts are questioning whether Boeing’s MAX 8 would be affected, Reuters reports. The 737 MAX 8 has an operating empty weight of 45,070 kg or about 49.68 tons, Reuters says, citing a Boeing airport document published in August 2017. So, depending on how the definition of “empty weight” is applied, the MAX 8 could be right on the borderline of China’s proposed weight range of 16.5 to 49.6 tons for the tariff.
TPG reached out to Boeing for more information on which of its aircraft might be affected but did not get an immediate response.
The new tariffs from China, seemingly issued in retaliation for President Donald Trump’s on $50 billion worth of Chinese goods in March, have increased speculation that the US and China are headed toward a full-blown trade war. Following the announcement of the Trump administration’s tariffs in March, Boeing’s stock had its worst month in two years, sliding about 12% over the course of the month and leading experts to speculate that the company could be among the first victims in such a trade war between the two countries.
There is good reason for Wall Street investors to be nervous. Boeing conducts a significant amount of its sales in China. At the end of 2017, it signed a deal to sell 300 planes worth $37 billion to a Chinese aviation group. There is also huge potential for future sales in the Chinese market. Boeing recently predicted China would buy 7,240 commercial aircraft worth $1.1 trillion between now and 2036, and the International Air Transport Association estimates that China would be the biggest aviation market by 2024. In 2016, the US exported $15 billion worth of aircraft to China, according to US trade data.
The start date for China’s new tariffs has not yet been announced. As for the tariffs’ effects on airplane passengers, industry experts have told TPG that the levies would likely have a negligible affect on airfares, at least in the immediate future.
Featured image by Scott Olson/Getty Images.
With great travel benefits, 2x points on travel & dining and a 50,000 point sign up bonus, the Chase Sapphire Preferred is a great card for those looking to get into the points and miles game. Here are the top 5 reasons it should be in your wallet, or read our definitive review for more details.
- Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
- Chase Sapphire Preferred named "Best Credit Card for Flexible Travel Redemption" - Kiplinger's Personal Finance, June 2018
- 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
- No foreign transaction fees
- 1:1 point transfer to leading airline and hotel loyalty programs
- Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 50,000 points are worth $625 toward travel
- No blackout dates or travel restrictions - as long as there's a seat on the flight, you can book it through Chase Ultimate Rewards