China Orders Domestic Airlines Not to Buy Boeing Aircraft and Parts

Korea Economic Daily

Summary

China has ordered a halt to the purchase of Boeing aircraft and parts, citing it as a retaliatory measure in the trade war with the U.S.
Boeing reported a stock price drop of up to 4.6% due to reduced sales to China.
China accounts for 20% of aircraft demand, which could lead to significant market loss for Boeing.

125% Tariff Makes It Impossible to Purchase American Products

China Accounts for 20% of Global Aircraft Demand, Big Hit to Boeing

China has instructed its domestic airlines not to accept additional deliveries of jets from the American company Boeing. This is part of the trade war retaliation following U.S. President Trump's imposition of a 145% tariff on Chinese goods. In response to this news, Boeing's stock price fell by up to 4.6% in pre-market trading on the U.S. stock exchange.

According to Bloomberg on the 15th (local time), the Chinese government has demanded that Chinese airlines stop purchasing aircraft-related equipment and parts from American companies. Sources cited by Bloomberg reported that this order was issued after China imposed a 125% retaliatory tariff on American products last weekend. The 125% tariff alone has more than doubled the prices of American aircraft and parts, making it virtually impossible for Chinese airlines to purchase Boeing aircraft.

The Chinese government is also considering providing support to airlines that incur increased costs by leasing Boeing jets, according to sources.

Market participants noted that the situation could be fluid, as President Trump has previously withdrawn some tariff measures, such as those on Apple products imported from China.

According to data from the Aviation Flight Group (AFG), about 10 Boeing 737 Max aircraft are currently being prepared for introduction by Chinese airlines. Some of these aircraft are parked near Boeing's factory in Seattle, while others are at a finishing center in the Zhoushan area of China, according to a production tracking company website.

Some sources indicated that some of these jets might have completed delivery paperwork and payments before the 125% tariff announced by China on April 11 took effect on April 12. In such cases, delivery within China might be permitted.

For Boeing, this is a significant setback in one of the world's largest aircraft sales markets. China is expected to account for 20% of global aircraft demand over the next 20 years. In 2018, about a quarter of Boeing's production was concentrated in China.

Boeing has not announced large orders from China in recent years due to trade conflicts and accidents.

China was the first to suspend operations of the 737 Max model after two fatal crashes in 2019. Following the trade dispute with the U.S., China has shifted significantly towards Europe's Airbus.

Chinese airlines still own hundreds of Boeing aircraft, which need maintenance, repair, and replacement.

On Friday, China announced that it would impose a 125% tariff on all American products starting April 12. President Trump's tariffs on China total 145%.

Boeing holds a number of finished aircraft made for Chinese airlines. Boeing warned that if trade tensions escalate, it could impact the supply chain, which has shown signs of normalization after severe impacts from the pandemic.

Guest Reporter Kim Jung-ah kja@hankyung.com