5 Reasons Why China is Going After Boeing

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In our article BoycottUSA and BoycottTrump Does Not Mean Not Buying American, we explain that China is applying there retaliatory tariffs to Donald Trump supporters and no the US as a whole.  That brings up the question of why China would target Boeing.

chicago-2016-presidential-election-results-no-support-trumpBoeing is based in Chicago and Chicago did not support Trump in the 2016 and they certainly don’t support him now:

Boeing’s primary assembly plant, which is the largest building on earth, is in Everett Washington and Washington State did not support Trump in 2016.  In fact Hillary Clinton won all 12 Washington State electoral votes.


Why Did China Target Boeing?

1: Boeing Is Perceived As Trump Friendly

boeing-chinese-targetWhile it is common sense and standard operating procedure for companies to quietly support their political leaders Boeing seems particularly aggressive in this area.  When it looked like Hillary Clinton was going to win the 2016 Presidential Election, Boeing was there to help

Boeing, like many companies, woke up on November 9 to an unexpected political landscape. The company had been preparing for a Clinton presidency. Timothy Keating, its long-time senior VP of government operations, served under President Bill Clinton. There was even internal discussion at Boeing that Keating might join a new Clinton administration. Source: money.cnn.com/2017/02/17/news/companies/boeing-trump-dennis-muilenburg/index.html

Now the Donald J Trump has won the White House, Boeing has not unexpectedly flip flopped but they have taken it further than most, making some believe that they have a genuine support for Trump.  From Presidential visits to photo opportunities to political conversation, Boeing is now tied to President Trump.

donald-trump-boeing-ceo-Dennis-Muilenburg“We’ve had the privilege of having a very open dialogue with him on business issues,” Muilenburg said on the earnings call. He said Boeing is “very supportive” of Trump’s plans… The CEO of Boeing has the ear of President Trump. “We’ve got a voice at the table,” chief executive Dennis Muilenburg told media and company analysts last month.  On Friday, Trump will be the first sitting president to visit Boeing (BA)’s fast-expanding campus in North Charleston, South Carolina, where he will attend the unveiling of Boeing’s new 787-10 Dreamliner. It will be the third meeting between Trump and Muilenburg since the president’s election.
Source: money.cnn.com/2017/02/17/news/companies/boeing-trump-dennis-muilenburg/index.html

President Trump, seeking to reset his stumbling presidency, hit the road for a photo op and returned to the simple economic message that got him elected, telling aircraft factory workers that “we’re here to celebrate jobs.”
Source: nytimes.com/2017/02/17/us/politics/trump-boeing-south-carolina-rally.html 

Boeing is the primary beneficiary of the US Export-Import Bank which helps finance riskier large scale business opportunities for US companies.  During the election Trump railed against the Ex-Im bank but after several conversations with Boeing, and others, has reversed his position:

President Donald Trump plans to revive the hobbled Export-Import Bank of the United States, his office said, a victory for American manufacturers like Boeing Co.
Source: reuters.com/article/us-usa-trump-eximbank-idUSKBN17F03C

Boeing, the primary beneficiary of the bank, has a market cap of almost $150 billion
Source: money.cnn.com/2017/02/17/news/companies/boeing-trump-dennis-muilenburg/index.html


2: Boeing Has Major Operations In Trump Friendly Regions of the US

Boeing, with 140,000 employees worldwide, says 1 out of every 4 jetliners rolling off its assembly lines is being bought up by Chinese customers.
Source: cnbc.com/2018/03/22/trumps-big-tariff-blow-on-china-may-cause-a-backlash-against-boeing.html

The map below does provide an insight into Boeing’s scale in the US but it does not tell you where the jobs are or how much they are needed.  Job losses in Southern California are not felt near as heavy as they are in Montana or other parts of the US heartland.  When people lose their jobs and don’t  quickly get hired somewhere else, those citizens vote for change.

…South Carolina is a so-called right-to-work state, with a low level of union participation. Since it began production here in 2009, Boeing has hired 7,500 employees spread around several facilities, investing more than $2 billion in land and infrastructure, while spending about $355 million each year on local suppliers and vendors, according to the company.
Source: nytimes.com/2017/02/17/us/politics/trump-boeing-south-carolina-rally.html 

boeing-us-operations-map


3: China is a Very Big Customer to a Very Big US Based Boeing

Boeing-airplanes-trade-war-targetBoeing has estimated that China will buy as much as $1 trillion of aircraft over the next 20 years.
Source: cnbc.com/2018/03/22/trumps-big-tariff-blow-on-china-may-cause-a-backlash-against-boeing.html

China wants to make the news and you don’t make the news by cancelling 1% of a companies orders.  China is a very big deal to Boeing.  The US builds the planes and China buys them:

Boeing makes its planes exclusively in the United States, but nearly 70 percent of the 763 jetliners delivered last year went to customers outside the country, including 22 percent to China. Muilenburg downplayed concerns of a backlash from China, which has ordered thousands of jets. Boeing plans to open an aircraft completion plant in China.
Source: reuters.com/article/us-usa-trump-boeing/trump-to-visit-boeing-plant-in-missouri-to-tout-impact-of-tax-overhaul-idUSKCN1GN0UF

Changes to just one of China’s airlines can shake Boeing because their orders are so large:

For Boeing, the nuclear option in the short run would be for China to cancel its existing orders, which includes a monster 300 aircraft deal announced last November worth an eye-watering $38 billion.
Source: businessinsider.com/how-china-america-trade-war-affects-boeing-2018-4

and China has dozens of airlines with large orders in the channel:

list-of-chinese-airlines-international-domestic-cargo

 


4: US Trade Partners Will Put Pressure on Trump To Get Boeing Back On Track

Boeing’s assembles their planes in the United States but the parts come from all over the world.  Those parts jobs are not small dollar operations and those other nations was those high paying high skilled jobs to be stable providers for their domestic economy.

boeing-parts-manufacture-country-of-origin


5: Boeing Seriously Affects The US Stock Market

boeing-largest-us-industrial-companyTwo things Donald J Trump pays attention to is the stock market and the investor class.  Both are worried.

If you want to know why the Dow soared above 25,000, I’ll give you a one-word answer: Boeing.  The aircraft maker is by far the single largest reason that the Dow Jones industrial average, to give the oh-so-popular market indicator its full name, is flying high. Through Dec. 22, Boeing stock was up 95 percent for the year, adding 960 points to the Dow.
Source: chicagotribune.com/business/columnists/ct-biz-boeing-dow-record-20180104-story.html

The Chicago-based maker of airplanes for both military and civilian use contributed 24 percent of the gain in the Dow Jones Industrial Average since December 2016
Source: cnbc.com/2018/03/22/trumps-big-tariff-blow-on-china-may-cause-a-backlash-against-boeing.html

On Wednesday April 4, 2018 China announced Tariffs on Boeing products which caused their stock to “tumble” .  With 600,000,000 shares on the market, this single drop lost Boeing about $12 Billion in market capitalization.


There are some news outlets saying that Boeing should not be too worried about the US China Trade war and even if they are correct Donald Trump should because worried employees vote for change.

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