Boeing faces perfect storm as tariffs take off

China tells domestic airlines not to place new orders for Boeing jets, adding pressure to the struggling American plane maker.

Boeing faces the danger of being left behind as buyers turn to Airbus.

In the global trade war, Boeing is a big loser.

Chinese officials told domestic airlines not to place new orders for Boeing jets and are requiring carriers to seek approval before taking delivery of already ordered aircraft. The tariff turmoil keeps getting worse for America’s largest exporter: Boeing’s vast and fragile supply chain is grappling with the end of its decades-long duty-free status. Boeing faces retaliatory tariffs from other countries. And airlines are bracing for a drop in demand for air travel.

The developments add new pressure to the struggling jet maker, which burned through $US14bn last year and had aimed to be cashflow positive by the end of this year. In the long run, the new tariffs could give a leg up to Boeing’s European rival, Airbus.

President Donald Trump has said his tariff blitz is intended to boost local manufacturing. But the trade war is hurting – not helping – one of the few major companies manufacturing hi-tech products in the US, said Bank of America analyst Ron Epstein.

Even if China signs off on Boeing deliveries, airlines could opt for delays to avoid hefty duties. China is forecast to be Boeing’s largest market over the next two decades. Boeing would take a $US1.2bn hit if China halted all deliveries this year, according to an estimate by equity research firm Bernstein.

China halted deliveries of Boeing jets following a pair of fatal MAX crashes in 2018 and 2019 and only resumed taking planes last year. Boeing, which for years has been working to clear parked planes from its inventory, delivered a number of much-delayed planes to China this year. Of the 130 planes Boeing has delivered globally this year through March, 18 went to Chinese airlines. Few purchases are bigger than a jetliner. A single 737 MAX carries a list price of more than $US100m.

Global airlines for years have clamoured for more of Boeing’s planes as air travel surged after the pandemic. Now, consumer sentiment is souring and some Americans have started cancelling travel plans because of rising costs and fears that the US economy could slide into a recession.

Ireland’s Ryanair, one of ­Europe’s biggest airlines, is set to receive 25 Boeing 737s in August but could delay taking the planes until next year, Michael O’Leary, the airline’s CEO, said this week.

Boeing CEO Kelly Ortberg has said he is concerned about the impact of tariffs on Boeing’s supply chain and the jet maker’s ability to export, in addition to direct costs that would result from ­duties on parts and materials.

The immediate fallout of China’s move is blunted by the fact that demand for Boeing planes far outpaces the jet maker’s pace of production. Boeing has an order backlog of 5500 planes; a plane ordered today won’t be delivered for close to a decade. The longer-term impact could be more serious for Boeing’s business in China, a country that represents a fifth of global ­demand for planes.

China’s Comac C919 jet, a competitor to Boeing’s 737, is years away from becoming a global force and still relies on US suppliers for parts. It delivered just 13 planes in 2024.

But trade tensions and higher costs for US planes could put Airbus, already outpacing Boeing in China, even further ahead if airlines start cancelling orders. Airbus has two final-assembly lines in China; Boeing doesn’t build planes there but has a centre where it completes mostly finished planes.

Boeing and its biggest suppliers rely on a huge network of suppliers, some of which are small, low-margin businesses struggling with labour shortages and higher costs. The network has been crippled by years of production stops and starts, leading to the manufacturing woes that culminated in the blowout last year of a fuselage panel on an Alaska Airlines flight.

Those suppliers face new disruptions after the up-ending of a trade deal that since the 1980s has allowed Boeing, Airbus and other aerospace manufacturers to build aircraft largely without tariffs.

“Everybody is saying, ‘We don’t know who pays, but under no circumstances is it going to be us’,” said Richard Aboulafia, managing director of AeroDynamic Advisory, an aerospace consulting firm. “That’s a dangerous thing, because you could have the things freeze up.”