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Abu Dhabi, UAEFriday 21 September 2018

Boeing shares downed by China aircraft tariffs as Airbus unscathed

Additional 25 per cent tariff on US aircraft hits Chicago plane maker with China set to be world’s biggest market for planes by as early as 2022

The 787 Aft Body manufacturing area is seen at Boeing South Carolina in North Charleston, South Carolina. The firm has outsold Airbus 4-to-1. Randall Hill/Reuters
The 787 Aft Body manufacturing area is seen at Boeing South Carolina in North Charleston, South Carolina. The firm has outsold Airbus 4-to-1. Randall Hill/Reuters

Boeing, the biggest US exporter, suffered a setback in China after the country proposed an additional 25 per cent tariff on US aircraft in a retaliatory move, giving rival Airbus a leg-up in a market set to the become the world’s biggest.

In a tit-for-tat response to tariffs by President Donald Trump, China announced the planned levy on aircraft weighing between 15,000 kilograms and 45,000 kilograms, which would include some variants of its 737 family of passenger jets. Single-aisle jets, dominated by Boeing’s 737 and Airbus A320 series, are likely to account for 75 per cent of the global market in 20 years, according to Boeing’s estimates.

China, poised to surpass the US as the world’s biggest market for planes by as early as 2022, is crucial for the Chicago-based plane maker. More than 50 per cent of the commercial jetliners operating in China are Boeing airplanes, with more than a quarter of its global delivery last year to the Asian giant. Boeing fell as much as 5.1 per cent to $314.10 in early New York trading ahead of the US market open.

Boeing and Airbus declined to comment on China’s decision. If the additional levy is approved, the total tariff will be 30 per cent.

“Airbus will be the outright winner,” said Shukor Yusof, founder of aviation consulting firm Endau Analytics in Kuala Lumpur. “It’s unprecedented and this is just the beginning. The US stands to lose more from this than China.”

“The countermeasure by China still looks restrained for now as not all passenger planes are affected,” said Jin Wei, an aviation researcher at the China Centre for Information Industry Development, a state-backed think tank in Beijing. “It’s not in the interest of Boeing or the US to cede market share to rivals in one of the biggest markets.”

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Read more:

China answers US tariffs with its own duties for $50bn worth of American imports

US tariff proposals target Chinese tech

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China will be adding 921 million passengers by 2036, fuelling demand for aircraft, according to the International Air Transport Association. That has prompted Boeing to set up its overseas completion centre in Zhoushan, China. The facility, with the potential to roll out eight to 10 737 Max aircraft a month, is expected to start operations later this year. Airbus has its own completion center in Tianjin.

Airbus has 1,542 aircraft in service in China, including cargo planes, and about 50 per cent of the market share. The country accounts for 24 per cent of the European company’s total deliveries. It also assembles the A320 family aircraft locally.

Last year, Boeing raised its 20-year forecast for aircraft demand in China as economic growth and an expanding middle class spur travel in the world’s most-populous nation. China will need 7,240 new planes valued at almost $1.1 trillion in the two decades through 2036, the plane maker said in September, raising it from an earlier forecast for 6,810 aircraft through 2035.

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