SEATTLE _ China's quick tit-for-tat retort Wednesday to President Donald Trump's proposed tariffs on that nation would apply retaliatory tariffs to certain models of Boeing 737 single-aisle jets _ but the threatened Chinese tariffs are carefully limited in scope and appear unlikely to have much near-term impact on Boeing.
Longer-term, though, analysts agree that a broad trade war between the U.S. and China could seriously hurt Boeing's business.
For now, the Chinese have deliberately targeted only specific 737 models that don't have a big sales backlog in China, said Credit Suisse industry analyst Rob Spingarn.
"The proposed scope for the tariffs appears to intentionally avoid the meat of U.S aircraft exports to China, suggesting to us that this is more of a warning rather than a quid pro quo response," Spingarn wrote in a note to clients Wednesday. "We think that both sides are rattling sabers in an effort to jumpstart serious trade talks that may ultimately result in a much more measured, negotiated outcome."
More troubling for Boeing is the possibility that an active U.S./China trade war could precipitate a general downturn in worldwide trade and economic activity that would severely damage airplane sales, said Doug Harned, an analyst with Bernstein Research.
"The most important aspect of the tariffs will be the effect on the global economy," Harned told his clients Wednesday. "Should we see a global recession, this would be highly negative for Boeing and Airbus."
A calibrated response
For now, though, the proposed tariffs are unlikely to have much effect on Boeing.
The reality is that China needs as many 737s as Boeing can deliver to feed the surging expansion of its air travel system. Last year, about one third of all the 737s built in Renton were delivered to Chinese airlines.
In addition, Boeing is opening a 737 completion center in Zhoushan later this year, where Chinese mechanics will install interiors and paint the aircraft for the Chinese market _ another compelling reason for China not to block 737 sales and deliveries.
So in proposing the tariffs, the Chinese government's definition of affected airplanes was very carefully calibrated to limit the impact. China announced the planned tariff on aircraft weighing between 15,000 kilograms and 45,000 kilograms _ that is between 16.5 tons and 49.6 tons, when empty.
The 737 MAX 8, by far the most popular model in the latest 737 family, is exactly 70 kilograms heavier than that range, and so should be excluded from the proposed tariffs.
The larger MAX 9, MAX 10 and all the Boeing widebody jets _ 767s, 777s, 787s and 747s _ are also excluded.
The only models that appear to be subject to the threatened tariffs are the older model 737NGs, still produced in Renton, and the smallest MAX, the new 737 MAX 7, which entered flight test just last month.
Even with the conservative assumption that all the customers in Boeing's backlog that are unidentified are Chinese airlines, Spingarn estimates that a maximum of 153 airplanes could be affected, just 2 percent by value of Boeing's China backlog.
The reality is that MAX 7 sales have been poor and its customers include just one Chinese airline, Ruili, which ordered a handful.
And if the proposed tariffs ultimately are imposed, any Chinese airline with older 737NG models on order could have the option to switch to MAXs to avoid paying the tariff.
That said, there's no certainty as to what precise tariffs will finally take effect.
The U.S. government has invited industry to comment on its proposed tariffs through May 11 and will hold a hearing on the plan May 15.
The extensive U.S. government list of Chinese goods that may be subect to tariffs includes Chinese-made "airplane parts," which theoretically could have a big impact on Boeing because the jetmaker imports many airplane parts, such as the 737 rudders, from Chinese suppliers.
However, such a U.S. tariff would hurt Boeing and the U.S. economy much more than China, so it's almost inconceivable that this or any similar tariff will be imposed after Boeing has presented its detailed comments to the government.
As China awaits the outcome of this U.S. consultation process, it set no date for its retaliatory tariffs to take effect.
The worry for Boeing is that this trade war might spin out of control and bring to earth the long-soaring arc of the world's airline markets.
Spokesman Chaz Bickers said Boeing is "assessing the situation" and noted that "these are proposals � and nothing is implemented yet."
"While both governments have outlined positions that could do harm to the global aerospace industry, neither has yet imposed these drastic measures," Bickers said in an e-mailed statement. "We will continue in our own efforts to proactively engage both governments and build on the recent assurances by U.S. and Chinese leaders that productive talks are ongoing."
