Tariff threats, China certification issues slow A220 sales

Trade wars

The trade wars President Donald Trump started with China, Canada and the European Union threw international relations and trade into turmoil. With Trump imposing tariffs on the two countries and the EU, retaliatory tariffs were imposed.

In the case of the EU, the Trump Administration proposes $11bn in tariffs on mostly non-aerospace goods because the World Trade Organization found Airbus hasn’t cured illegal subsidies for the A380 and A350.

Airbus refuses to pay more than $600m in launch aid to Germany, arguing the WTO case was rendered moot after former CEO Tom Enders announced in February the program will be terminated in 2021. It argues the A350 launch aid commercial terms are inconsequential but will be cured.

The EU threatens to impose $15bn in tariffs on US goods and Boeing airplanes because illegal tax breaks granted by Washington State to Boeing haven’t been cured.

The level of tariffs that may be authorized is before the WTO now.

Scherer and Airbus CEO Guillaume Faury denounced the trade war as counter productive to both sides. Scherer told LNA in a press gaggle Tuesday that Boeing has more to lose than Airbus, although an LNA analysis shows Airbus has more outstanding orders to the US than Boeing has to the EU.

Scherer and Faury called for a negotiated settlement.

The Trump Administration proposed levying tariffs on fuselages, wings and other components imported into the US, a clear shot at the materials sent to the Airbus A320 Final Assembly Line in Mobile (AL).

These tariffs clearly affect the A320 family. It’s unclear if wings for the A220, which are made in Northern Ireland—will be affected. Northern Ireland is part of the UK, which for the moment is part of the EU. After the UK leaves the EU, will tariffs still apply? This hasn’t been answered.

The fuselage of the A220 is made in China. With the trade war between the US and China showing no signs of abating, will the A220 fuselage imported to the Mobile assembly line beginning next year be added to the list of tariffs?

China certification

The proposed US/China Bilateral Safety Agreement (BASA), in which reciprocal aircraft certification is granted, is the model for a similar agreement with Europe’s EASA, which certifies Airbus aircraft.

Scherer said no similar BASA agreement has been reached with EASA and China. But he said Airbus should be able to apply for certification under BASA, because EASA and the FAA have reciprocal agreements.

“It should lead to the opening of new market opportunities,” Scherer said. “I’m thinking of the 220.”

Clouds over the A220

These issues place a cloud over sales of the A220 in the US and China. Scherer hopes these issues will be resolved soon.

But for now, he points to these as the reason why Airbus hasn’t sold more A220s.

 

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