Tariff wars set to hit Airbus & Boeing, Delta furious

For years the US has been complaining that the E.U. illegally subsidised Airbus in its earlier days.

Nobody really denied it, because while it became illegal, it wasn’t at the time and without state aid, it would never have taken off.

Boeing has just as effectively received state aid, from tax breaks at state level running into the billions, and a carte Blanche access to government – ie tax payer – subsidised technologies transferred from defence to civil aerospace.

However under the Trump administration and its obsession with tariffs – taxes that are paid not by the manufacture but the person or company buying the product – a brutal trade war looks set to hit aerospace giants both sides of the Atlantic.

It’s important to understand what a tariff is. It’s a tax. It’s purpose is to raise prices on goods and services to deter you from buying them. The idea is you will then buy cheaper products or services made in your own country or in one you have a preferred deal with.

They have universally been proven over 200 years to fail. The rich buy what they want, no matter the cost. Lower incomes buy the cheaper product – which often rises in price to nearly match the market of the taxed imports, as domestic manufacturers realise they can make more money. No matter there is only one victim: the customer.

The World Trade Organisation WTO has after years of pressure and debate, said that the US can put tariffs on Airbus product. If they do, the E.U. has said it will do the same to Boeing.

Delta went after the US administration viciously yesterday, saying that it would cost them dearly, reduce profits and inevitably, be passed on to passengers.

RyanAir in Europe bluntly told Boeing – “eat the tariffs” – they’re not willing to pay the 10% taxes expected on 737 imports.

Nobody wins if these tariffs get imposed. It reduces trade, cuts orders, complicates importing/exporting with red tape bureaucracy and that further raises costs.

And if aircraft cost more airlines will cut orders reducing production and pass on costs in ticket prices.

Tariffs played a disastrous role in the 1930’s depression, largely being blamed for extending it by years, because they deterred trade and industrial recovery.

They are also once again showing that economic activity in a highly globalised world, where dozens of countries participate in aerospace components for both Airbus and Boeing, is being depressed.

Nobody disagrees that China has been allowed to get away with industrial piracy on a scale that’s hard to appreciate, but taking down the rest of the worlds industries – it’s successful aviation industries – is simply self harm on a preposterous scale.