Trade Wars: Aircraft on the line
The pot-shots that US and China have been taking at each other with plans of heavy new import tariffs can take us in one of two directly opposite directions – an all-out calamitous trade war or frank negotiations that allow both sides to stepdown without losing face. It all depends on who you ask.
Since March, when President Donald Trump’s announced the imposition of an additional 25% import tariff on all foreign steel and 10% on aluminium, China has retaliated with tit-for-tat tariff threats of its own on US agricultural imports valued at around $3 billion. The US then upped the ante, expanding its own tariffs on Chinese imports to include some 1,300 products valued at $50 billion.
Released on 3 April, included in these new tariffs were six important aircraft products:
- Helicopters, with an unladen weight not over 2,000 kg
- Helicopters, with an unladen weight over 2,000 kg
- Airplanes and other powered aircraft, with an unladen weight not over 2,000 kg
- Airplanes and other powered aircraft, with an unladen weight over 2,000 kg but not over 15,000 kg
- Propellers, rotors and parts thereof
- Other parts of airplanes and helicopters
On the surface, this does not really affect anything. The US simply does not buy Chinese helicopters and China does not really export them. You will be hard pressed to find a Harbin or Changhe helicopter outside of China. Apart from Pakistan which is considering adopting the Changhe Z-10 attack helicopter, the manufacturer has not ventured far out of its homeland.
However, both countries are playing a dangerous zero-sum trade game which neither side can hope to win. If China decides to start imposing tariffs on US aircraft, we could see Chinese companies cancel aircraft orders with companies like Bell and Boeing.
Last June, Bell netted an order for 100 407GXPs with the Xi’an-based Shaanxi Energy Group and began delivering the helicopters in November. China is a region that the helicopter, superyacht and business aviation markets are all eyeing with interest. American manufactures do not want to lose out.
In 2017, China added 86 new helicopters to its national fleet, leading the pack for regional fleet growth in Asia. Most of the helicopters in China fly on multi-missions that include sightseeing, aerial photography and onshore oil and gas.
Whilst helicopters have not been directly targeted, airplanes have. On 4 April China yet again expanded on its tariffs to match the $50 billion of the US. In this list of 106 products was “Airplanes and other aircraft with an empty weight exceeding 15,000 kg but not exceeding 45,000 kg.”
This is targeted at US commercial aircraft manufacturers, in other words Boeing. In response to this, Boeing voiced concerns about the ongoing trade disputes. However, it does not think that these tariffs will be fully implemented, taking the back and forth as a dialogue to spark talks. The company released a statement saying:
“Boeing is confident that dialogue continues. While both governments have outlined positions that could do harm to the global aerospace industry, neither has yet imposed these drastic measures. 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. A strong and vibrant aerospace industry is important to the economic prosperity and national security of both countries.”
Boeing and Airbus have both opened production facilities in China. Boeing set up its first overseas facility in Zhoushan, China last year to paint, assemble interiors and deliver on an order of 100 Boeing 737 planes. It was not specified whether the Boeing backlog will be affected by the 25% tax. Airbus was a little earlier into the market, setting up a final assembly line in Tianjin in 2008.
However, there might be a way around the tariffs if Chinese airlines want to import commercial aircraft. Chinese airlines could potentially register an aircraft in a different country but operate it on the same routes it would were it to be registered in the country.
In the midst of all this, Trump – as he often does – took to Twitter, this time slamming the World Trade Organization (WTO) for classifying China as a developing nation. Trump wrote on Twitter:
“China, which is a great economic power, is considered a Developing Nation within the World Trade Organization. They therefore get tremendous perks and advantages, especially over the U.S. Does anybody think this is fair. We were badly represented. The WTO is unfair to U.S.”
China requested consultations with the WTO related to the US aluminium and steel tariffs. The organisation rejected the request, according to the Russian media outlet SputnikNews.