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Boeing Co., the biggest U.S. exporter, suffered a setback in China after the country proposed an additional 25 percent tariff on U.S. aircraft in a retaliatory move, giving rival Airbus SE a leg-up in a market set to the become the world’s biggest.
In a tit-for-tat response to tariffs by President Donald Trump, China announced the planned levy on aircraft weighing between 15,000 kilograms (33,000 pounds) and 45,000 kilograms, which would include some variants of its 737 family of passenger jets. Single-aisle jets, dominated by Boeing’s 737 and Airbus A320 series, are likely to account for 75 percent of the global market in 20 years, according to Boeing’s estimates.
China, poised to surpass the U.S. as the world’s biggest market for planes by as early as 2022, is crucial for the Chicago-based planemaker. More than 50 percent of the commercial jetliners operating in China are Boeing airplanes, with more than a quarter of its global delivery last year to the Asian giant. Boeing fell as much as 5.1 percent to $314.10 in early New York trading ahead of the U.S. market open.
Boeing and Airbus declined to comment on China’s decision. If the additional levy is approved, the total tariff will be 30 percent.
“Airbus will be the outright winner,” said Shukor Yusof, founder of aviation consulting firm Endau Analytics in Kuala Lumpur. “It’s unprecedented and this is just the beginning. The U.S. stands to lose more from this than China.”
Shares of Airbus, based in Toulouse, France, fell 0.7 percent to 92.99 euros as of 12:23 p.m. in Paris. They had risen earlier after China’s retaliation plan was made public. Boeing shares, which closed Tuesday at $330.82, are up 12 percent this year.
“The countermeasure by China still looks restrained for now as not all passenger planes are affected,” said Jin Wei, an aviation researcher at the China Center for Information Industry Development, a state-backed think tank in Beijing. “It’s not in the interest of Boeing or the U.S. to cede market share to rivals in one of the biggest markets.”
China will be adding 921 million passengers by 2036, fueling demand for airplanes, according to the International Air Transport Association. That has prompted Boeing to set up its overseas completion center in Zhoushan, China. The facility, with the potential to roll out eight to 10 737 Max aircraft a month, is expected to start operations later this year. Airbus has its own completion center in Tianjin.
Airbus has 1,542 aircraft in service in China, including cargo planes, and about 50 percent of the market share. The country accounts for 24 percent of the European company’s total deliveries. It also assembles the A320 family aircraft locally.
Last year, Boeing raised its 20-year forecast for aircraft demand in China as economic growth and an expanding middle class spur travel in the world’s most-populous nation. China will need 7,240 new planes valued at almost $1.1 trillion in the two decades through 2036, the planemaker said in September, raising it from an earlier forecast for 6,810 aircraft through 2035.
China also announced additional 25 percent tariff on products such as soybeans and U.S.-built cars.
–With assistance from Benjamin Katz
©2018 Bloomberg L.P.