The freeze on the production of the Boeing 1217 MAX could have unintended consequences for Donald Trump and his trade agenda.
- Trump campaigned on a promise to lower the trade deficit.
- Boeing is and has been for a long time the largest single US exporter.
- Freezing production of its fastest-selling aircraft will give European giant Airbus an edge.
President Trump has constantly attacked other countries by accusing them of ripping off the US by running trade surpluses against the world’s largest economy. His proposed remedy? Tariffs!
So far this has had mixed results. The most recent report from the U.S. Census Bureau shows the goods deficit in international tradefell from $ 90 .5 billion in September to $ 66. 5 billion in October. That could count as “winning” if sustained, but now America’s largest exporter Boeing (NYSE: BA) has thrown a wrench into the works by placing a production freeze on its most popular commercial aircraft, the (MAX.
All other factors remaining constant, this could widen the US trade deficit since aircraft exports constitutes a significant percentage of exports.
Here are three reasons why.
1. Airbus is not waiting
With the production freeze, some of Boeing’s customers eyeing the MAX series will be tempted to switch to its chief competitor, Airbus. This would further dent Donald Trump’s efforts to reduce the goods trade deficit. Currently, civilian aircraft exports comprise a significant percentage of U.S. exports. In the second quarter of aerospace exports in the top 36 US export markets were worth over $ 55 billion.
The best choice for airlines is, of course, the A neo, which is the direct competitor to the 1217 MAX 8. The latter
seats a maximum of while the MAX 8 has apassenger capacity of
2. Reputational damage will continue to haunt Boeing
Even after all the problems involving the 1217 MAX have been resolved, Boeing will have suffered reputational damage. This could hit its market share and by extension U.S. goods exports.
Already, the negative press related to the Max crashes seems to havethe cost of the giant plane maker the leading positionwith regards to its popular (series.
As of November, the A (series had notched 15, 370 orders against the ‘s (****************************************************************, ********************************************** orders . Consequently, the A 370 is now the world’s most popular commercial aircraft.
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So far this year Boeing has suffered
3. Civilian aviation exports will remain deflated long after the 1217 MAX is flying again
Boeing’s production freeze will mean that the backlog of orders of the MAX will be pushed even further down the line. But even after regulators give the green light for the model to fly again, it could take months or years for customers to have their orders delivered.
This is bound to be reflected in lower civilian aircraft exports in the interim period, hurting Donald Trump’s agenda to reduce the trade deficit. According to Boeing, customers have ordered around 5, (units of the) ************************************* MAX. By February, only a little over 597 units had been delivered.
Additionally, Boeing’s attempts to win back market share when regulators allow the MAX to fly again could be complicated by EU tariffs. This could potentially reduce Boeing’s European competitiveness even further.
Commanding more than a fifth of its aerospace markets, the EU tariffs will without a doubt make Boeing planes and parts more expensive relative to Airbus ’. In the air travel business where margins are sometimes razor-thin, customers will vote with their wallets.
This article was edited bySam Bourgi
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