Boeing Co. fell victim to China’s escalating trade war with President Donald Trump as the biggest U.S. exporter faces a proposed 25 percent tariff on American-made aircraft.
In a tit-for-tat response to Trump, China announced the planned levy on aircraft in a weight range that would include some variants of Boeing’s 737 jets. Single-aisle planes, dominated by the 737 and Airbus SE’s A320 family, are likely to account for three quarters of the global market over the next two decades, according to Boeing estimates. The shares dropped as much as 5.7 percent, the most intraday in two months.
The escalating standoff between the world’s two largest economies raised the specter of a broader trade war that would weigh on global economic growth. For Boeing, there’s also the risk that the battle will give Airbus a leg up in China, which is poised to surpass the U.S. as the world’s biggest market for aircraft by as early as 2022. The Asian giant accounted for more than a quarter of Boeing’s global deliveries last year.
“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 U.S. stands to lose more from this than China.”
Boeing fell 4.2 percent to $317 at 10:36 a.m. in New York, the biggest decline on the Dow Jones Industrial Average. Airbus fell 1.1 percent to 92.58 euros after initially rising following China’s announcement on tariffs against the U.S. Boeing and Airbus declined to comment.
China’s proposed tariffs would affect planes weighing between 15,000 kilograms (33,000 pounds) and 45,000 kilograms. If an additional levy is approved by the state, Boeing would face a total tariff of as much as 30 percent. The 737 and the A320neo have sticker prices of in the $100 million range.
The move against Boeing comes as China pursues its own ambition of building a planemaker to disrupt the market duopoly, with state-owned Commercial Aircraft Corp. of China Ltd., or Comac, testing a new narrow-body jet. Both Airbus and Boeing have had to contend with government pressure to establish local production facilities while at the same time navigating China’s lax intellectual property laws, a key trigger for Trump’s initial tariffs.
“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 Center for Information Industry Development, a state-backed think tank in Beijing. “It’s not in the interest of Boeing or the U.S. to cede market share to rivals in one of the biggest markets.”
The outlook for rapid growth in the Chinese aviation market has prompted Boeing to set up its overseas completion center in Zhoushan, China. The facility, with the potential to roll out between eight and 10 737 Max aircraft a month, is expected to start operations this year. Airbus has its own completion center in Tianjin.
Airbus has more than 1,500 aircraft in service in China, including cargo planes, and a market share of about 50 percent. The country accounts for about a quarter of the European company’s total deliveries. It also assembles the A320 family aircraft locally.
Last year, Boeing raised its long-term 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 more than 7,000 new planes valued at almost $1.1 trillion in the next two decades, the planemaker said in September.
China on Wednesday also announced additional 25 percent tariffs on products such as soybeans and U.S.-built cars.
— With assistance by Dong Lyu, Kyunghee Park, and Benjamin D Katz