Nov. 29, 2016, (c) Leeham Co.: When it comes to the prospect of imposing trade sanctions or retaliatory tariffs on Airbus for airplanes ordered by US customers, the European manufacturer has some advantages over Boeing few people apparently have thought about.
One is called Alabama. It’s where Airbus is producing A320 family members for US customers.
Alabamans voted by 1.76-to-1 for Donald Trump. Sixty-three percent to 35%.
Donald Trump tapped Sen. Jeff Sessions of Alabama to be his Attorney General. Sessions was one of the first in Congress to endorse Trump. He served as an advisor throughout the campaign.
Sessions is a big supporter of Airbus.
Sen. Richard Shelby, the other Alabama Senator in Congress, is also a big supporter of Trump. And of Airbus.
It’s highly likely that Sessions and Shelby will bend Trump’s ear in favor of not levying tariffs on Airbus planes.
During the run-up to the competition between Airbus (EADS) and Boeing in the KC-X tanker competition, EADS, as the Airbus parent was then named, developed deep ties with the Deep South in the US—all “red” territory in US elections colorization. (Red is for Republicans and Blue is for Democrats.)
Airbus Helicopters is a major supplier to US law enforcement and the Department of Defense. Its US headquarters is in a Dallas (TX) suburb, Texas is another Deep Red state.
In contrast, Boeing’s corporate headquarters is in Chicago (IL)—a Deep Blue state.
It’s Boeing Commercial Airplanes headquarters is in the Seattle suburb of Renton (WA)—another Deep Blue state.
Yes, Boeing Defense is in St. Louis (MO), which went for Trump. But this is unlikely to be enough to sway an argument.
But the biggest impediment the US Trade Representative and Boeing have in directly penalizing Airbus comes back to Alabama. The Airbus A320 final assembly line
in Mobile was built specifically to deliver airplanes to US customers.
Thus, it’s a US-produced aircraft (much like the Boeing 787 despite structures and wings coming from all over the globe).
Trade tariffs can’t be placed on US-produced airplanes.
LNC doesn’t know how many of the hundreds of A320s destined for US customers over the next six or seven years will come from Mobile. Initially the production rate is ramping up to 48 per year with a capacity of 96 per year. There’s room to grow beyond that.
But clearly, the airplanes produced in Mobile reduce the opportunities for the USTR and Boeing to impose tariffs directly on A320s.
Wide-body A330s and A350s are only produced in Europe, so these are entirely fair game.
As LNC wrote last September, the likelihood of tariffs on Airbus airplanes is remote.
The Alabama connections makes it even more remote.