How will the implementation of tariffs impact Boeing?

How will tariffs impact Boeing?  The incoming Trump 2.0 administration has spoken of implementing additional tariffs, including a potential 60% levy on Chinese goods and 25% on our North American trading partners Canada and Mexico.  Most experts believe that if the US implements tariffs, other countries will retaliate.  That will create a more chaotic situation for international trade.

The potential impact of such tariffs

on Boeing could significantly delay its recovery.  They would impact the company in multiple ways.  Boeing would see higher costs because of its international supply chain.  The would also likely see delayed revenues due to the higher cost of Boeing aircraft versus those from Airbus in global markets.. In our opinion, tariffs could lead to further damage to Boeing’s nascent recovery.

Aerospace is Complicated and International

Aerospace is an international industry, with engines and components build both domestically and internationally. The most popular commercial aircraft engine, the CFM LEAP, is utilized on the Boeing 737 MAX, Airbus A320neo and COMAC C919 aircraft families. That engine is built by CFM International, a 50/50 joint venture of GE from the US and Safran from France. Would a 50/50 JV qualify as domestic or international for tariffs? Theoe engines contain parts made from both US and European suppliers. Having engine production on both continents and a global supply chain and service and support network, how would one classify it?  When trade policy impacts joint ventures and technology development, the industry suffers.  

Similarly, the supply chain for the Pratt & Whitney GTF is international, with components from Japan Aero Engines, MTU in Germany, and others in addition to Pratt & Whitney’s US facilities. These engines are utilized by Airbus aircraft that are assembled in France, Germany, Canada, China, and the United States.  Would a US built Airbus be taxed differently than on assembled in France, or China?

What happens if retaliation occurs based on where parts are built, or even where raw materials were sourced. Some aircraft components are currently being built with raw materials purchased from China. Will they face a 60% tariff? Since suppliers have contracts to deliver components at a fixed price, who will eat the difference? If customers are expected to pay, international customers would switch to other OEMs, and Boeing would lose even more market share to Airbus, or potentially even COMAC .

Since Airbus has a final assembly facility in the US, would its aircraft be subject to tariffs, or components of its aircraft be subject to tariffs? The devil is in the details, and the incoming administration has not provided specifics on their proposals that would enable industry participants to more accurately determine the impacts on their operations.