Boeing is on the defensive and in a tough spot. China recently stopped accepting delivery of aircraft as tariffs have been rising. Boeing is preparing to ramp back up production of its 737 MAX jets. They recently announced plans to raise production to 38 jets a month by 2025. To address trade imbalances, the U.S. has raised the effective tariff on imports from China a mind boggling 145%, causing deliveries to stop. In retaliation, China responded by enacting a 125% tax on U.S. goods.
The trade tensions have already led to the return of two of Boeing’s planes, and a third is soon to follow. In addition to adding complexity to deliveries, these returns underscore the threat that tariffs present to Boeing’s production strategy as a whole. Currently, Boeing has nine jets that haven’t even gone into its production pipeline. It just wants to understand better what China’s plans are for these kinds of aircraft. If they don’t use them, they’re prepared to cancel and reallocate them to other clients.
Boeing’s Chief Executive Officer, Kelly Ortberg, addressed these issues during an investor call, emphasizing the company’s commitment to navigating the trade challenges. He said that the company has daily dialogues on the impacts of the trade war, and claimed,
“there is not a day that goes by that we’re not engaged with either cabinet secretaries or either POTUS himself regarding the trade war between China and the USA.”
He expressed optimism about potential negotiations, saying he is “very hopeful we’ll get to some negotiations.”
Boeing’s Chief Financial Officer, Brian West doubled down on free trade policies being critical to the company. He noted that the decline of tariffs could at times be dramatic. They certainly won’t fall to zero, indicating a need for a nuanced understanding of international trade moving forward.
Amidst this turbulence, Boeing is focusing on re-selling 41 already constructed planes to other buyers. Demand for Boeing aircraft has never been higher among other airlines, sending the betrayed Boeing a little hope—as much of it that can exist in this turbulent time. The company must contend with its supply chain, which is primarily based in Japan and Italy, facing tariffs of 10%.
The biggest one came when some 30,000 American factory workers went on strike. The resulting perfect storm of these factors has created significant operational and financial pressure on Boeing’s operations and stability.
Boeing is deeply concerned about the impacts of increasing trade tensions and the unprecedented changing of tariffs. The company is focused on working closely with its suppliers to ensure the continuity of production. As these negotiations move forward, the value of Boeing’s future hangs heavily in the balance. The strategic decisions made to meet these challenges are key to prospering in the cut-throat aerospace sector.