Tariffs will add millions of dollars to the cost of an airliner and destroy a free trade system that has created a massive export surplus for the U.S. industry according to aerospace officials canvassed by MSNBC on Thursday. Boeing CEO Kelly Ortberg just happened to be testifying at a Senate Commerce Committee hearing on Wednesday and diverted from the topic at hand (Boeing’s progress on improving quality control) to comment on the tariffs that will affect raw materials and parts it uses in its aircraft. “Free trade is very important to us,” Boeing Ortberg said at the Senate hearing. “We really are the ideal kind of an export company where we’re outselling internationally. It’s creating U.S. jobs, long-term high value U.S. jobs. So it’s important that we continue to have access to that market and that we don’t get in a situation where certain markets become closed to us.”
Aerospace companies are apparently lining up to ask the White House to spare aviation and citing a 45-year-old trade agreement covering the import and export of civilian and military aircraft between 33 countries. The tariffs essentially negate the U.S.’s participation in that deal and the cost will be high. Add to that the 25 percent tariff on steel and aluminum, which is separate from the aerospace deal, and the U.S.’s dominance in the industry will be threatened according to industry analyst Richard Aboulafia. “This is the one manufacturing sector where America has, has enjoyed a tremendous trade surplus,” Richard Aboulafia, managing director at AeroDynamic Advisory told CNBC. “So the idea of fighting a trade war for this industry, it’s living in a crystal palace hurling giant boulders.”
Just who will pay the extra costs in the end is also in question. Manufacturers cannot keep up with demand for new airliners and the backlog continues to grow. Whether the airlines and leasing companies that are the main customers for airplanes are prepared to eat the extra costs is a major question. Although Boeing and some foreign owned companies that have assembly plants in the U.S. and technically meet the White House definition of “Made In The U.S.” they use parts that come from all over the world and the rules are clear on those. “It doesn’t matter who owns the company. If an item crosses the border, it will have to be paid by importer of record,” said Dak Hardwick, vice president of international affairs at the Aerospace Industries Association,Hardwick said.
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