Tariffs may crash aviation industry
LONDON — Aviation is soaring: Passenger traffic is up, fuel prices are under control and rising demand from Asia is driving aircraft orders. So what could possibly go wrong?
One big thing: a trade war. Aircraft makers at this week’s Farnborough International Airshow, a biannual extravaganza where billions of dollars of planes and parts are bought, say thousands of jobs are at risk in this most international of industries as President Trump threatens to raise tariffs on a variety of goods and other countries prepare to retaliate.
While Trump has said trade wars are “good and easy to win,” aviation experts say American companies like Chicago-based Boeing will take the first hit because most of U.S. aerospace production goes to foreign buyers.
“Well over of 80 percent of U.S. commercial aerospace is exported,” said Richard Aboulafiah, a respected aviation analyst at the Teal Group. “U.S. aerospace is in the front line waiting to get shot first.”
That’s because aviation is truly global in production and demand. Boeing and Airbus, its European rival based in Toulouse, France, dominate the commercial aircraft market, competing for business and suppliers from China to Qatar and Canada. Being able to shop around for components makes the companies more profitable and its aircraft better.
“Aerospace thrives on free and open trade,” Boeing Chief Executive Dennis Muilenburg told the BBC yesterday. “We are concerned it could affect supply chain costs, but those supply chains are flowing in both directions (between China and the U.S.). It is an intricate network around the world.”
The U.S. has put tariffs on $34 billion of Chinese goods, with China responding with an equivalent sum. The Trump administration is planning tariffs on another $200 billion in goods. The U.S. has also put tariffs on steel and aluminum from China, the EU and several other countries, which responded in kind.
Boeing, which describes itself as “the top U.S. exporter,” reported revenue of $93.4 billion last year. It employs more than 140,000 people in the U.S. and 65 foreign countries.
Almost 80 percent of the 713 commercial aircraft orders for which Boeing identified a buyer last year came from foreign companies, according to data on Boeing’s website. Flydubai, a low-cost carrier based in the United Arab Emirates, ordered 175 Boeing 737 Max aircraft in December, the company’s single biggest order of the year.
China, which has been the target of much of Trump’s ire when it comes to trade, is also a major customer for Boeing.