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China fires warning with 25% tariff on Boeing planes, which experts say could hurt manufacturing, travel

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Boeing’s popular 737 aircraft appear targeted by part of the $50 billion in tariffs China announced Wednesday amid an escalating trade dispute with the U.S.

Beijing said the timing of the 25% tariff on 106 items will depend on what President Trump does about plans to raise similar charges on Chinese goods.

But for Boeing, the tariff signals a significant charge on one of its largest and growing markets. Boeing’s stock price fell 2.3% to $323 by 1 p.m. Wednesday.

“This was a response that was proportionate but did not escalate. It did not get to the heart of Boeing’s exports,” said Richard Aboulafia, a vice president at Teal Group who analyzes commercial aviation. “But if there is retaliation, all bets are off. I’m very concerned.”

Robert Mann, an airline-industry consultant and former airline executive at R.W. Mann and Co., said the trade dispute could hurt airlines more than manufacturers by discouraging business travel along routes that already have too many flights.

“Whether it’s a trade war or more physical than that, it deters the demand for travel,” Mann said. “There’s already too much capacity chasing too few passengers at sufficient prices. This will just detract from the existing insufficient demand.”

China’s announced tariffs on cars, chemicals and planes came hours after the Trump administration also proposed 25% tariffs totaling $50 billion on 1,300 categories of goods. The threat of a trade war sent stock prices tumbling.

Trump denied a trade war with China in a tweet Wednesday after China’s announcement. The U.S. bought $375 billion more in goods and services from China last year than it sold there, according to the U.S. Commerce Department.

“We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S.,” the tweet said.

Commerce Secretary Wilbur Ross brushed off concern over a trade war with China.

“What we’re talking about on both sides is a fraction of 1% of both economies,” he told CNBC.

But if the unscheduled tariffs went into place, they could significantly affect Boeing and travel generally, according to experts.

Boeing projects that China will have a fleet of 8,150 of the world’s nearly 47,000 airliners by 2036.

The Chinese tariff on Boeing’s planes seemed carefully tailored to cover a portion of single-aisle planes weighing up to 45,000 kilograms.

The tariff would cover variants such of the 737 — the manufacturer’s most popular line — such as the 800 and 900ER versions, and what are called New Generation or NG aircraft. But the tariff doesn’t appear to cover the latest version that Boeing began delivering last year called Max, which are heavier and have been overhauled with more-efficient engine options.

After delivering through the years 1,045 types of 737 aircraft to China, Boeing listed 273 unfilled orders in February. But few are the 737-800 versions subject to the tariff.

The largest pending orders for types of 737 aircraft include 50 for CALC China, which are all Max versions; 83 for China Development Bank, most of which are Max, with five 737-800 versions; 45 for China Southern Airlines, all but two of which are Max; 25 for Donghai Airlines, which are all Max; and 38 for Ruili Airlines, all but two of which are Max.

“It was a glancing blow,” Aboulafia said. “It was a carefully calculated response.”

But analysts questioned where the dispute would lead, possibly covering more types of planes or other industries.

“At this point, we need a cool hand on things in the Trump administration, and we’re not sure they’re going to play it cool,” Aboulafia said.

Mann said the travel industry had hoped for an agreement for unhindered flights between the two countries, called an Open Skies agreement, which seems less likely during a trade dispute.

“It’s going to be one more bit of negative news for Chinese visitation to the U.S., which has been improving,” Mann said. “This kind of fisticuffs between the two countries is unlikely to yield an Open Skies agreement any time soon. That’s what everybody was hoping for as the resolution to too much capacity in the U.S. to China market.”

More on trade dispute with China:

Stocks fall as China tariff threat hits Boeing shares as trade war fears intensify

China raises tariffs on $50B of U.S. soybeans, aircraft and more

Full list of U.S. products that China is planning to hit with tariffs

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