Feb. 6, 2017, © Leeham Co.: Boeing officials must be downing antacids by the bushel about now.
President Donald Trump has the Mexican president pissed off. Trump’s spokesman says the immigration ban (or pause, or suspense, depending on the day it’s described) may be expanded to other “terrorist” nations.
Trump threatens a 45% tariff on Chinese imports and a 25% tariff on Mexican imports.
Why do Boeing officials probably have upset stomachs and flaming heartburn?
Because Boeing has more than 1,200 orders from countries that are in Trump’s crosshairs.
Nearly 770 of them are 737s. More than 300 are 777s. Nearly 170 of them are 787s.
And these are just the identified customers. There’s no telling how many of the 1,101 737s, 16 777s and 76 787s (at Dec. 31) were ordered by Trump’s target and potential target countries.
LNC detailed the exposure Boeing has to Trump’s immigration “no-fly” list in our Jan. 30 post to Iran and Iraq.
Trump spokesman Sean Spicer said the immigration ban could be extended to other countries with terrorist activity.
I put together the list of Boeing customers in these countries. It’s not small.
There are 1,242 orders that are on the identified customer list. This is twenty-one percent of Boeing’s backlog. The Middle East alone accounts for 560 orders from all the countries.
I’ve identified 250 known orders placed by customers from China on Boeing’s website. Boeing also reports that customers in China ordered 280 aircraft, so there are at least 30 Unidentified customer orders. There is a general belief the number is considerably higher.
“China Inc.” is Boeing’s largest single customer; no aircraft orders are placed in China without government approval.
Trump’s threatening China with tariffs is playing with fire. Boeing stands a very good chance of becoming collateral damage.
Between the election and inauguration, I was occasionally asked if Trump would impose tariffs on China and Mexico, and if so, what would the effect be on Boeing.
I always replied, “I don’t know. Trump changes his position so often, I don’t know what he’ll do.”
In the three weeks since he became president, Trump is proving to do what he initially said on a variety of issues. Anything after his initial statements now appear to have been smokescreens.
So, the original question stands. Will he impose tariffs on Mexico and China? I still don’t know and I certainly hope not. The effect on Boeing could be disastrous.
CNN’s Jon Ostrower pointed out that 100% of the wiring for the 787 comes from the Mexican aerospace supply chain. Flight Global’s Steve Trimble reported that the entire US aerospace industry imports about $1.6bn in goods from Mexico. How much of this is for Boeing, only Boeing knows.
But Mexico already indicated it could retaliate by imposing tariffs on US goods. Aeromexico had 60 737s and four 787s on direct order from Boeing at the end of last year. Might these be subjected to a tariff of identical proportion that Trump imposes on Mexican goods? The most commonly cited tariff is 25%.
Parenthetically, Trump’s branded line of clothes is made in Mexico.
Trump threatened to impose a 45% tariff on China’s goods. China accounts for 280 orders from Boeing that we know of. Could you imagine China slapping these airplanes with a 45% tariff? Or cancelling orders? Or rewarding Airbus with future orders?
The Chinese government doesn’t fool around with being threatened. American Airlines last week complained the government won’t grant it any slots for its authorized Los Angeles-Beijing service. Having been a Chinese watcher since 1988, I think this smacks of the government sending Trump a message.
(American asked Trump’s Department of Transportation to not renew Air China authority to Houston. We’ll see what happens.)
Parenthetically, Ivanka Trump’s clothing line is made in China.
If Trump is truly determined to ban travel and immigration from countries with terrorist activity, the list is long and broadly dispersed.
Top of the list, of course, is Saudi Arabia, which was the home to nearly all the hijackers on 9/11. Qatar often has been cited as funding terrorism. Egypt (which has no outstanding identified Boeing orders) was the location of one airliner bombing and perhaps a second targeted at Egyptair. Indonesia and Malaysia have been terrorist locations.
If Trump extended the immigration/travel ban to any of these and other countries, what might the fallout to Boeing be?
Boarder security is indeed an important issue, but the fact is the US already has a strong and lengthy refugee vetting process.
The threats to impose tariffs ignore the potential consequences on US businesses. In Boeing’s case, the company is the USA’s largest exporter.
Boeing has a large lobbying arm in Washington (DC) and CEO Dennis Muilenburg already has had a couple of conversations with Trump.
But this isn’t enough. Boeing’s workforce needs to start contacting their Congress Members to express alarm at the reckless threats proffered by Trump.