After China announced the suspension of all deliveries of its jets to airlines in the country, Boeing (BA) shares fell on Tuesday. That is just part of the escalating trade war in which both the US and China are heavily affected. The suspension was initiated by the Chinese against Boeing carriers.
Halting the Boeing deliveries by China put Boeing, an integral part of the Dow Jones Industrial Average, down by almost 1% midday after a Bloomberg report confirmed the above observations. The report read that under the direction of Chinese officials, they will not allow delivery of Boeing aircraft to airlines. This was all done in the most recent livening up of tensions surrounding the trade dispute between two of the world’s largest economies. Neither the Chinese government, Boeing, nor the White House had immediate comments on the report.
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Trump on It
The event occurred, and President Donald Trump tweeted about it, saying that China “stopped short in the big deal with Boeing.” “It won’t take possession” of airplanes that had already been produced. Such incidents are critical because Boeing not only form part of America’s largest exporting firm, but the company is also a great contributor to the economy of the United States.
Economic Growth Entailed by Trade War
The increasing trade war between the U.S. and China has rippled beyond the aerospace industry. Some would view this as a continuing fallout after Trump’s tariffs, among which include a 145% tax slapped on a huge number of Chinese products, not to mention the retaliations it incited in other countries, thereby worsening the already dire global situation. The dilemma is especially difficult for an intense firm like Boeing, which sells almost two-thirds of its commercial aircraft to overseas customers.
The Trade Dispute that Affects Boeing
Boeing suffers the most under this ugly trade dispute. Unlike multinationals, Boeing does not manufacture limited parts into the final product at U.S. factories while transferring much of their manufacturing labor overseas. Boeing has a very large international market where China ranks as one of the largest markets. Because the aircraft is too expensive, tariffs that almost double the price make Boeing’s jets too expensive for a Chinese airline to buy. Boeing is now in a dangerous situation that finds it in an even bigger hole since the company was already stacked with financial losses.
Sales And Trade Tariffs Struggled Through
Boeing’s aspirations have already suffered over the past few years because of the high costs of operations. The company has ultimately reported up to $51 billion in losses in operations since 2018. China, the largest single market for aircraft in the world, had hitherto counted as a good account for Boeing; Chinese airlines were deemed to purchase 8,830 new airplanes in the next 20 years, according to Boeing. However, losses due to the trade war and tariffs were expected to hit Boeing hard on Boeing’s sales in China.
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Trade-Related Issues Yet to Address
Boeing has its share of problems beyond trade obstacles. The manufacturer’s models include the 737 Max, which was banned after two fatal air accidents that happened in late 2018 and early 2019. The ban has caused a near-standstill in the deliveries of the same aircraft to China following the slow clearance of the aircraft by Chinese aviation authorities for service return. Though there have, of course, been a few more visits during the last year by the delivery truck, the company has faced a phenomenal 737 Max storm of trade tariffs that has nearly brought sales in China down to zero.
Boeing’s inventory and financial issues
This situation places Boeing in an especially difficult position because deliveries constitute an important part of revenues for this company. Boeing builds its airplanes basically first and delivers them usually to receive payment. With 55 planes in inventory pending delivery, mostly to customers in China and India, Boeing is under increasing financial stress. This latest stoppage, therefore, adds more problems to the company’s challenges regarding the situation within a very difficult global trading environment.
