Introduction to the Folly of Trump’s Trade War

The ongoing trade war initiated by Donald Trump has been a subject of much debate, with its effects being felt across various sectors. One of the most significant casualties of this trade war is Boeing, the largest exporter in the U.S. The company has been facing significant challenges due to the trade tensions between the U.S. and China.

The Impact of China’s Ban on Boeing

On Tuesday, news emerged that Chinese authorities have ordered the country’s airlines not to place new orders for Boeing aircraft and to get approval from the government before taking delivery of planes already ordered. This move is a significant blow to Boeing, which relies heavily on international orders. According to industry analysts, China’s orders account for 5% to 6% of Boeing’s overall international order book. However, with about 80% of its production going overseas, Boeing is especially vulnerable to the chaos created by Trump’s tariff war.

The Effects on Boeing’s Business

The size of the blow China struck against Boeing is hard to measure, especially in the short term. However, the company’s efforts to compete with the European consortium Airbus will undoubtedly be hindered. China is the biggest customer of Airbus, which is scheduled to deliver 136 planes to China this year, 148 next year, and a total of 850 over the coming decade. In contrast, Boeing’s book of unfilled Chinese orders numbers only 130, mostly of 737 Max airliners.

Trump’s Reaction to the Ban

The Chinese ban plainly hit Trump in the solar plexus. After the ban was reported, Trump took to his social media platform, Truth Social, to grouse that China "just reneged on the big Boeing deal, saying that they will ‘not take possession’ of fully committed to aircraft." However, Trump has no one to blame but himself, as Boeing’s plight is just one aspect of a White House tariff policy that increasingly resembles a tale told by an idiot, full of sound and fury, signifying nothing.

The Incoherence of Trump’s Policy

Economist Justin Wolfers of the University of Michigan put his finger on the fundamental incoherence of Trump’s policy, stating, "This is a tariff policy we’ve been told will solve the fentanyl crisis, get rid of illegal immigration, rescue the budget deficit, solve bilateral trade deficits, and cure toe fungus… Actually, we’re serving none of those goals." The policy’s incoherence is evident in its inability to achieve its stated goals, including reducing the budget deficit and shrinking bilateral trade deficits.

The Consequences of the Trade War

The trade war has had far-reaching consequences, not just for Boeing but also for other American manufacturers. Shares in the AI chipmaker Nvidia fell nearly 7% after it disclosed a $5.5-billion charge linked to U.S. restrictions on export sales of its H20 chips. The long-term cost of any Chinese roadblock on Boeing can’t be predicted just yet, but it’s clear that the company’s efforts to compete with Airbus will be severely impacted.

Boeing’s Financial struggles

Boeing has been in a bad way at least since 2018, the last year in which the company booked an annual profit. Over the subsequent six years, it lost $35.7 billion on revenue of $408 billion. The company has also been hemorrhaging cash, burning through $14.3 billion last year. Management says the cash burn will continue through part of this year but turn positive later in 2025.

The Roots of Boeing’s Transformation

The roots of Boeing’s transformation could be found in its 1997 acquisition of McDonnell Douglas. That deal brought to the C-suite the acquired company’s top management and its cost-cutting culture. The move to Chicago in 2001, prompted largely by tens of millions of dollars in tax abatements and other benefits, put 2,100 miles between headquarters and the company’s most important segment, commercial aircraft.

Conclusion

In conclusion, the trade war initiated by Trump has had severe consequences for Boeing, the largest exporter in the U.S. The company’s efforts to compete with Airbus will be severely impacted, and its financial struggles will continue. The incoherence of Trump’s policy is evident in its inability to achieve its stated goals, and it’s clear that the policy is unsustainable. It’s time for Trump to reassess his approach and consider the long-term consequences of his actions.

FAQs

1. What is the impact of China’s ban on Boeing?
   The ban is a significant blow to Boeing, which relies heavily on international orders. China’s orders account for 5% to 6% of Boeing’s overall international order book.
2. How will the trade war affect Boeing’s competition with Airbus?
   The trade war will hinder Boeing’s efforts to compete with Airbus, which is scheduled to deliver 136 planes to China this year, 148 next year, and a total of 850 over the coming decade.
3. What are the roots of Boeing’s transformation?
   The roots of Boeing’s transformation could be found in its 1997 acquisition of McDonnell Douglas, which brought a cost-cutting culture to the company, and its move to Chicago in 2001, which put distance between headquarters and the company’s most important segment.
4. What is the long-term cost of the Chinese roadblock on Boeing?
   The long-term cost of any Chinese roadblock on Boeing can’t be predicted just yet, but it’s clear that the company’s efforts to compete with Airbus will be severely impacted.
5. Is Trump’s tariff policy sustainable?
   No, Trump’s tariff policy is not sustainable. It makes absolutely no sense as an economic policy, and its impact on American manufacturers and consumers will be severe.