The world’s two biggest economies are locked in a trade tit-for-tat as they announce tariffs on more than a $100bn of combined goods.
Earlier this week, the Trump administration unveiled a list of c$50bn in Chinese electronics, aerospace and machinery products it plans to hit with steep tariffs, in order to penalise China for discriminatory policies that the United States says puts its companies at a disadvantage. In response, the latest salvo came the following day when the Chinese government proposed new tariffs on dozens of US products including aircrafts with an operating empty weight (OEW) between 15,000kg and 45,000kg. Although China’s retaliatory announcement was not altogether unexpected, it surprised some and subsequently markets reacted swiftly, dragging shares of the largest aircraft manufacturers into the red.
The announcements spurred questions from aerospace specialists as to which aircrafts will be impacted, the risk mitigation strategies available and more importantly, the potential long-term implications. After reading the fine print on China’s proposed aircraft tariffs, investors grew less alarmed as the threatened 25% levy targets a generation of Boeing’s 737 jetliners that are nearing the end of the production line.
Tariffs are by their very nature protectionist measures, but in this case protecting what? China’s state aircraft manufacturing industry could eventually benefit from such state support as they struggle to find buyers for the home-grown C919, but these tariffs would do nothing to impact its most entrenched competitors. This begs the question, are these proposed measures designed to boost the Chinese aero industry at America’s expense, or is this merely an escalation in trade posturing?
“U.S. President Donald Trump’s latest salvo attempting to punish China for intellectual property theft saw the levying a 25% tariff on some 1,300 items, including a host of aircraft parts. Among the targeted products are parts for internal combustion aircraft engines and turbojets, wiring and rubber for use on aircraft, optical instruments, parts and accessories for aeronautical or space navigation and dozens of other line items related to aerospace.”