Shares of US plane maker Boeing Co. were struck on Wednesday, after China announced to impose tariffs on American-made products, which include aircrafts.
In a direct response to tariffs by US President Donald Trump, the Chinese Ministry of Commerce said it would implement 25 percent tariff on $50 billion worth of US exports, with the 106 affected products consisting of aero planes, soybeans, chemicals, and automobiles.
As has been the case since trade war concerns surfaced, industrials were the most affected. Boeing’s stock price declined 5.6 percent to $312.24 in pre-market trading, following China’s decision. The shares, which closed 2.6 percent higher to $330.85 on Tuesday, have gained 12 percent this year.
The exact start date for the new tariffs has not yet been specified. The country has already implemented charges on about $3 billion worth of US imports on Monday.
The levies by the Trump administration are expected to mainly affect Chinese aerospace, tech, and machinery industries. Others would hit medical equipment, medicine and educational material, such as bookbinding tools.
Boeing’s Tariff Troubles
The tariff puts Boeing at a risky position against its main rival Airbus SE in the best-selling single-aisle sector. Shares of Airbus were down by 1.1 percent to €92.52. Boeing and Airbus did not comment on China’s decision.
China declared tariff on aircrafts weighing 15,000 kilograms (kg) and 45,000 kg, which would include some models of its 737 series.
China’s aircraft market is vital for Boeing, since 50 percent of commercial jetliners in the country are Boeing planes. The Chicago-based company said its 737 jet and Airbus’A320 will likely represent 75 percent of the market overall in 20 years.
The jet maker also stated in September that aircraft demand in China will likely grow and will need 7,240 new planes worth nearly $1.1 trillion over the next couple of decades through 2036, instead of its previous forecast of 6,810 planes through 2035.
Shares of Boeing have been pressured in recent weeks, as the issue about a potential global trade war between the US and China continued.
However, some stock researchers described the plane maker’s tariff problems to be overstated. They said before China’s latest statement that even if there are some commercial aircraft cancellations from China-based airlines, Boeing is flexible enough to pull forward deliveries from other customers.
The company expects customers worldwide will need more than 41,000 new planes in the coming two decades, with China being the main driver for demand. A trade association of the world’s airlines said the country will be adding 921 million passengers by 2036, bolstering demand further for planes.
It was reported last week that China Southern Airlines Group is set to receive 309 aircraft over the next three years. Boeing is also scheduled to deliver 71 planes to the airline this year. So far, there have not been any signs that their deal is at risk.
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