Stocks in U.S. aerospace giant Boeing (NYSE:BA) have been hit today over fears that China could retaliate to President Trump’s potential tariffs on Chinese goods. Boeing stocks are currently priced at $330.29 USD, down -2.47% after a day which has seen prices sink to their lowest levels in a month. Although a rocky recovery is underway from mid-day’s lowest point, this is still a blow to Boeing’s shareholders.
Boeing’s presence in the U.S. economy can’t be overstated. It is the largest company in the Dow Jones Industrial Average by individual share price and has a market cap of $194 billion USD. It, therefore, weighs heavily on the Dow, so if Boeing stocks perform badly, the Dow performs badly, which is bad news for the US economy. So it would make sense that China would hit Boeing first. The thing is, they haven’t even done anything yet.
>> Junior Lithium Miners See Big Upside as China Moves to Secure Lithium Supplies
The drop in share prices is simply over fear that they might. Trump is considering a hit to U.S.-China trade by effecting a $60 billion tariff on imports from China, which runs a $375 billion trade surplus with the United States. If this goes through (and even if it doesn’t – China know that Trump is considering it, which is bad enough) China is likely to come back with a counter-strike.
What’s more, China is in the position to do a good deal of harm to Boeing. According to the company, one out of every four commercial jets leaving their factories will be sold to a Chinese customer. In addition, Boeing estimate that the country will buy around $1 trillion worth of aircraft from them over the next 20 years.
>> Trump Tariffs: Who Stands to Benefit?
So what can we expect? At the moment, it’s hard to say. It depends how hard Trump pushes his increasingly tough trade rhetoric. It would be risky to do so, given that China produces a great deal of tech for the US. It’s worth remembering that China won’t necessarily target Boeing if it does retaliate, but a potential threat to a quarter of its product sales is something worth bearing in mind.
Chicago-based Boeing currently employs just over 141,000 people. It is both the largest aircraft manufacturer and second-largest defense contractor in the world.
Featured image: Foreignpolicy.com – JOHANNES EISELE/AFP/Getty Images
