The news just got much worse for Boeing, even as the aircraft manufacturer continues to struggle over the 737 MAX issue.
As the trade war between the United States and People’s Republic of China continues to escalate, China’s next retaliatory move may be against Boeing. The warning was lodged by Hu Xijin, the Editor In Chief of the Global Times, a newspaper widely seen as a mouthpiece for the communist party.
China may stop purchasing US agricultural products and energy, reduce Boeing orders and restrict US service trade with China. Many Chinese scholars are discussing the possibility of dumping US Treasuries and how to do it specifically.
— Hu Xijin 胡锡进 (@HuXijin_GT) May 13, 2019
China accounts for 15% of global aviation market and is a huge (H-U-G-E) market for Boeing. Putting Boeing in the crosshairs of the trade war underscores what President Donald Trump’s Director of the National Economic Council Lawrence Kudlow told Fox News Sunday yesterday:
Chris Wallace: The Chinese may suffer consequences, but it’s U.S. businesses and U.S. consumers who pay, correct?
Kudlow: Yes, to some extent. I don’t disagree with that. Again, both sides … will suffer on this.
Boeing is still facing a publicity crisis and deeper credibility crisis over its handling of the 737 MAX program. As revelations emerge that Boeing likely cut safety concerns, it faces the “Pinto-ization” of its prized MAX program if it does not find a way to quickly contain the fallout.
China is too wise to “cut off its nose to spite its face” but it would not surprise me to see several Boeing deals cancelled to send a message to the United States.
CONCLUSION
I’m not an economist so I’ll leave it at that, but as an observer of the aviation world I do have to wonder how much it will cost American workers and companies to seek some semblance of “trade balance” when the PRC has a tremendous competitive-advantage in labor…
> Read More: Donald Trump Offers 737 MAX Advice To Boeing Via Twitter…
Well this was totally predictable. Action and reaction. Whoever expected China would dance to US music is naive. I am no fan of China for various reasons but it is refreshing to see that after probably close to 100 years of US bullying the world around finally someone seems to stand up and push back.
A misguided article and an incredibly stupid first comment by comrade Ron. The US is not looking for trade parity. Larger, more advanced economies almost always run trade deficits. The main issue is China’s outright theft of intellectually property, or demanding IP in exchange for access to markets. In case you haven’t figured it out, China only cares about China. They aren’t interested in playing nice or playing fair for mutual benefit, they only care about their long term plan of being the lone superpower, and the world will not be a better place if that comes to pass.
Ron, the poster child for low education standards, then chimes in to bash the US finally pushing back against China. Who exactly has the US been bullying the past 100 years? Despots and communists? Was the US bullying when we sent our own to twice die by the millions for the freedom of Europe, only for Europe to turn around and screw over the US in trade and foreign policy at every opportunity? Are we bullying poor innocent Iran, or NK? You have been programmed well, my little drone.
@WR2: Thank you for your comment. I wish the President would make arguments solely based on theft of IP (which I agree is a huge issue) versus the problem being the trade deficit itself.
@WR2 – working in the electronics industry I’m well aware of the argument against IP theft (or as you state, demanding IP in exchange for access), and I’m sympathetic towards it.
I just think a trade war is a very blunt instrument to use against that specific problem. It feels very childish and tit-for-tat. Address the IP problem head-on like an adult. Don’t drag steel, agriculture, etc. into it.
@WR2
Thanks for your very measured observations.
Agree that China only cares about China and that trade ethics are below par – I have experienced such first hand – they go by ‘the end justifies the means’. Not accepting their lack of trade ethics is perfectly OK but it would be smarter to use an approach that would be less damaging to Americans. Eg ask your farmers.
For the rest I would suggest: read some quality history books and analysis to understand the impact of US foreign policy since the 1930’s. Examples are plentiful and widely available in the better book stores or sites.
And while you are on to it ask yourself a very simple question: who benefited most? The answer may surprise you.
This is an opportunity for the EU to negotiate away the current trade barriers put up by the People’s Republic of China. If China retaliates, then Airbus could also be affected. Then China can buy Sukoi Superjets like the one that crashed at SVO recently and maybe Tu-204’s.
One suspects there is rather more of John Bolton and Mike Pompeo in this lunacy, and somewhat less of Larry Kudlow/ Steve Mnuchin. Trump didn’t even know enough about the way tariffs work that he was tweeting that China would be paying the 100 billion impost ( as opposed to US importers and , ultimately, consumers). Perhaps he knew how they work but the reality wouldn’t be as effective as the lie.
I am not entirely sure what President Trump thinks he is doing. The European Union has about 200 million more consumers than the United States and its aviation company, Airbus, has a much better relationship with China, having agreed to share some intellectual property.
I have no doubt that China — with its robust high-speed rail network as an alternative to short-haul aviation — would be willing to suffer some short-term pain as part of making a long-term shift to Airbus and Comac.
Boeing has set itself up for failure with its terrible culture over the past two decades and now Trump is just exacerbating the pain with his absurd trade war.
These tariffs will hurt China more than the US.
With China dumping product below cost in markets the tariffs are needed to level the trade field. Trump is the only president with the spine to do this. It needed to be done. It’s costly to all of us as we all buy goods made in China but it will eventually get sorted out.