Aerospace & Defense

Boeing Stock Slammed by Chinese Tariffs

We’re all about to find out whether trade wars are good and easy to win. If you’re keeping score at home, just keep an eye on the share price of Boeing Co. (NYSE: BA). That’ll give you a rough idea of how the war’s going.

In Wednesday morning’s premarket session, Boeing stock tumbled more than 6.5%, following Tuesday’s announcements by the U.S. of tariffs on some 1,300 items imported from China, including certain aircraft parts, and a reciprocal announcement by China of tariffs on 106 items, including certain aircraft.

The United States will impose a tariff of 25% on the items listed in a memo from the Office of the U.S. Trade Representative (USTR). The reciprocal list of U.S. exports that will be subject to a 25% Chinese tariff includes soybeans, tobacco, frozen orange juice, some cars and trucks, and aircraft.

Boeing gets hurt by goods traveling in either direction. The company imports parts from Chinese firms that the company uses to build its airplanes. Those are included in the list of goods from the USTR that will be subject to U.S. tariffs.

The list also includes Chinese-made C919 and ARJ21 passenger planes. The C919 is still undergoing flight testing and won’t be available for sale for a few years. The regional ARJ21 is aimed at the domestic market, and Comac, the Chinese aircraft manufacturer, is targeting production of 25 planes a year by 2020. Neither is any immediate threat to either Boeing or Airbus.

The planes that Boeing sells to China will be subject to a 25% tariff when they are delivered to Chinese customers. The tariffs for completed planes apply mainly to Boeing’s best-selling 737 family. Airbus, of course, is not affected by the tariffs except that most observers expect it to benefit over time if the tariff war drags on.

Boeing traded down 5.4% in Wednesday’s premarket session at $313.08, after closing at $330.82 on Tuesday. The stock’s 52-week range is $175.47 to $371.60, and the 12-month consensus price target is $386.83.