Trade Wars

Alasdair Whyte
By Alasdair Whyte October 20, 2017 11:10

Trade Wars

The biggest story in commercial aviation this week was the decision by Airbus to partner with Bombardier on the C-Series. The European manufacturer will be given 51% of the programme. The driving force for the deal is the near-300% tariff that the US government wants to see imposed on any C-Series bought by US airlines. Airbus says it will look at assembling aircraft in the US to avoid this.

This time the tariffs have backfired completely.

Boeing’s complaint has played into the hands of its biggest rival and made life tougher for other US companies. The C-Series is a great aircraft but it also risked the whole company. With Airbus involved, Bombardier will now be able to invest more in business aviation where its aircraft compete with US companies like Gulfstream and Textron Aviation.

But there will be other trade wars.

President Trump’s America First policy reflects public opinion. A 2016 Economist/You Gov surveyshowed that more than half of Americans do not believe that globalisation is a “force for good” in the world. The same is true in many mature economies (which also tend to be the largest business jet markets).

This view is understandable from people who have lost jobs or not seen wages rise. But it is worrying for business aviation. Trade is a big driver of aircraft sales.

To paraphrase the line often ascribed to French economist Frederic Bastiat: “If goods don’t cross borders, business jets won’t.”

 

Alasdair Whyte
By Alasdair Whyte October 20, 2017 11:10