Last week, as the world was busy grounding the Boeing 737 Max before any more of them decided to ground themselves, we gently suggested that while safety concerns were most assuredly at play, the “ban the planes first, ask questions later” character of the global backlash smacked of disdain for the Trump administration’s aggressive trade posturing.
The fact that China was first to ground the planes in what certainly appeared to be a snap decision, was no coincidence, and more than a few analysts and commentators suggested Beijing was keen on exploiting the incident to bolster the fortunes of the country’s own long-haul aircraft and also to establish China as a leading voice in air safety.
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How Long Before Trump Demands The World Stop Blackballing Boeing?
After documenting the perils of regulatory capture and walking readers through the obligatory trail of lobbying cash, we noted that Boeing is a potentially key part of the burgeoning Sino-US trade agreement.
Boeing CEO Dennis Muilenburg (with whom Trump spoke over the phone last week) underscored the extent to which Boeing is wrapped up in the trade discussions earlier this month. Here’s Reuters to explain (from a March 7 piece):
Purchases of U.S.-made Boeing Co aircraft by China could be part of a sweeping deal currently being negotiated to end the months-long trade war between Washington and Beijing, Boeing’s top executive said on Thursday.
A tit-for-tat trade war between the world’s two largest economic powers has slowed the global economy. It has also opened up new risks for Boeing, which calls itself America’s biggest exporter, in the world’s fastest growing aviation market. Boeing sells roughly a third of its top-selling U.S.-made 737 jetliners to customers in China.
Boeing Chief Executive Dennis Muilenburg told an aviation summit in Washington that he sensed U.S.-China trade talks were progressing “in a good way.”
“They are dealing with some of the tough framework issues around intellectual property and things like that,” Muilenburg said. “I do think they are making progress. And at the same time, I think there’s an economic opportunity here for airplanes to be part of the ultimate deal and help further close the trade deficit gap.”
Fast forward a week and the 737 saga is still front page news, no small feat in an era where the news cycle turns seemingly by the hour.
Well, according to the ubiquitous “people familiar with the matter”, Beijing might well decide to nix the 737 Max from the list of US exports it will buy as part of the Trump’s “biggest trade deal ever”.
“Boeing jets were featured on a draft list of American products China would buy to reduce its trade surplus with the US”, sources told Bloomberg. In light of recent events, China is considering either removing the planes from that list or else replacing them with other Boeing models.
Does this have the potential to derail, or at least delay, the trade truce? Well, yes.
“A reduction in aircraft purchases could make it harder for China to fulfill an offer it’s said to have made to pare its $300-billion-plus annual goods trade surplus with the US over six years, and potentially delay any overall agreement between the two countries”, Bloomberg goes on to write.
There you go. What we would reiterate here is that Trump will be the opposite of amused in the event Boeing isn’t able to come up with a solution to this that satisfies China’s safety concerns. And really, it’s at least possible that Beijing could claim any fix isn’t good enough on the way to explaining why previous efforts to cut the trade balance might need a rethink, although it’s probably unrealistic to believe that China would risk this whole thing falling apart due to something Trump has no control over.
Whatever the case, you shouldn’t be surprised if Trump starts making threats on Twitter once Boeing does manage to get the planes back in the sky stateside. His patience for other countries persisting in bans on the aircraft once Boeing claims it’s “fixed” will likely be very thin.
Meanwhile, this is the second worst month for Boeing’s shares since 2009.
Won’t it be difficult for Trump to tell the Chinese to trust Boeing management when there’s an active grand jury investigation? Credibility, once squandered, is not easily regained. The Seattle Times article on Sunday about the 737 Max is worth reading.