WASHINGTON: US President Donald Trump on Thursday criticized China for backing out of a deal to buy new Boeing planes due to tariffs imposed in the rivals’ trade war.
“Boeing should default China for not taking the beautifully finished planes that China committed to purchase,” Trump wrote on social media, without giving more details.
“This is just a small example of what China has done to the USA, for years,” he added.
US aviation giant Boeing’s CEO Kelly Ortberg said Wednesday confirmed that Chinese customers had stopped taking delivery of aircraft due to the “tariff environment.”
His remarks signaled growing disruption caused by tit-for-tat levies exchanged between the world’s largest economies this month.
New US tariffs have reached 145 percent on many Chinese products, while Beijing has responded with fresh 125 percent duties on imports from the United States.
The tariff blitz — which Trump says is retaliation for unfair trade practices, as well as a bid to restore US manufacturing prowess — has rattled markets and raised fears of a global recession.
Beijing on Thursday threw cold water on Trump’s apparent optimism about a US-China deal to lower tariffs, saying that suggestions of ongoing talks were “groundless.”
Trump told reporters on Wednesday that his country would have a “fair deal with China,” adding when asked if Washington was talking to Beijing that “everything’s active.”
Industry sources said the comments were seen as a signal to Beijing and Washington that the tariff conflict between the world’s two largest economies risked damage as Chinese airlines scramble for capacity and Boeing is left with a new stockpile.
Washington had previously signalled openness to de-escalating the trade war, stating earlier this week that high tariffs between the US and China were not sustainable.
Boeing is one of the largest US exporters and historically sent a quarter of its planes to China, though the share of Chinese airlines in its order backlog now stands at 10 percent after European rival Airbus increased market share.
Airbus has been in on-off negotiations for at least a year to try to grab a huge order of up to 500 jets, though China usually treads carefully over all major purchase decisions at times of geopolitical uncertainty, industry sources said.
Airbus said it never comments on commercial discussions that may or may not be happening.
Potential alternative markets for Boeing jets include India, Latin America and Southeast Asia but discussions have barely begun because of their complexity and uncertainty over who might blink in the tariff standoff, industry sources said.
Reselling
Amid the delivery standoff, Boeing said it is looking to resell potentially dozens of planes locked out of China by tariffs.
The move to prevent a repeat of the costly build-up of undelivered jets seen during past safety and trade crises comes as the planemaker seeks to prevent tensions undercutting its efforts to save cash and pay down debts.
Boeing took the rare step of publicly flagging the potential aircraft sale during an analyst call on Wednesday, saying there would be no shortage of buyers in a tight jet market.
“Customers are calling, asking for additional airplanes,” CFO Brian West said. Such negotiations are usually kept tightly under wraps.
Two sources, who declined to be named as the discussions are private, said Air India was seeking around 10 narrowbody planes from Boeing for its budget carrier Air India Express, which has a fleet of more than 100 aircraft.
Air India, Air India Express and Boeing did not immediately respond to requests for comment.
“Air India is very interested ... if the deal goes through, the planes are expected to be added to the fleet by end of the year,” the first person said, adding the talks were in early stages.
Air India Express has previously taken white tail aircraft — or jets manufactured for one customer but acquired by another.
A third source familiar with talks between Air India and Boeing said any difference in jet configuration between its fleet and the incoming planes meant for Chinese customers may be factored into price negotiations.
The move could be a boost to Air India’s expansion plans as the group’s growth has been constrained by a lack of new aircraft.
Last month, Air India CEO Campbell Wilson said the airline was a “victim of circumstance,” referring to delivery delays plaguing Boeing and Airbus.
Complex negotiations
However, experts warned that carrying out the threat to divert jets to other buyers would not involve a simple switch.
Finding new customers after planes have been built “can be a costly endeavour,” industry publication Leeham News said.
Experts say many components, such as cabins, are picked by airlines and switching configurations could cost millions of dollars. Doing so may also create a tangle of contractual commitments and need the co-operation of the original buyer.
For its part, China has urged Washington to abandon the tariffs but its airlines are seen as hungry for new planes to meet demand and stay within domestic aircraft age restrictions.
“This will be extremely complicated. Everyone is flexing muscle but nobody completely has the upper hand,” said a senior aircraft finance industry source who requested anonymity.
Boeing’s public stand follows a threat from tariffs to the aerospace industry’s decade-old duty-free trading status. Senior industry officials say, however, there is no clear evidence of a reported official Chinese government ban on US jets.
The move to repatriate and re-market jets stands in contrast to a build-up seen during an almost five-year import freeze on 737 MAX jets into China and previous trade tensions.
“We’re not going to continue to build aircraft for customers who will not take them,” Ortberg told analysts.
Two jets ferried to China in March for delivery to Xiamen Airlines returned to Boeing in Seattle in the past week.
A third 737 MAX flew from Boeing’s Zhoushan completion center near Shanghai to the US territory of Guam on Thursday, Flightradar24 data showed. Guam is one of the stops Boeing delivery flights make on the journey across the Pacific.
The third plane was initially built for Air China , according to Aviation Flights Group. The flag carrier did not respond to a request for comment.
Boeing had planned to deliver around 50 new planes to China over the rest of this year, West said. It is studying options for re-marketing 41 that are already built or in production.
