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Shares in Boeing (NYSE: BA) declined by 12.9% in the week to Friday morning. Like most of the market, the aerospace giant felt the impact of the tariffs announced by the U.S. administration.
Boeing and tariffs
The tariffs potentially hit Boeing in two ways. First, they can negatively impact its competitive positioning. Boeing is a major U.S. exporter and a company likely to suffer in an extended trade conflict. It also sources products internationally. In addition, its suppliers source products internationally, so tariffs are likely to raise its costs, make its airplanes less competitive, or negatively impact margins. They could also slow its supply chain -- a key issue as Boeing tries to ramp up 737 MAX production.
The second potential impact comes from a slowing in global growth caused by an extended trade conflict. When growth slows, so does travel activity, and airline profitability takes a hit, leading to airplane order cancellations and delays.
What's next for Boeing?
It's important to put the tariff actions into context. If they are the opening salvo in a series of negotiations leading to more favorable trade conditions for U.S. exporters, they could be a net positive for Boeing.
It's too early to tell what the outcome will be and whether these tariffs are strategic and lasting or tactical in nature, intended to ensure a level playing field for international trade. One positive is that the U.S. is not imposing the same kind of restrictive trade practices as those being imposed on the U.S. Tariffs can be lifted more easily when necessary. That said, if the trade conflict lasts, then it's not good news for Boeing.
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