MarketLine Blog

Boeing vs. Bombardier: Tariffs justified as Bombardier receives state aid

In September 2017, the US Department of Commerce announced the preliminary decision to implement import tariffs of approximately 220% on any imports of Bombardier’s C-Series jets into the US. Following a complaint by major competitor Boeing that Bombardier was dumping its jets into the US market as below cost-price, the tariff plan has met with widespread criticism across Canada – where Bombardier is based – and in the UK, where wings are built in a plant in Belfast, currently providing 4,200 jobs.

In reality the tariff – which would more than triple the cost of a C-Series jet in the US – is only in response to unfair government support for Bombardier by the Canadian and UK governments which enabled the company to continue to operate where it would otherwise have failed and collapsed. The Canadian government’s $1bn bailout in 2015 and – to a lesser extent – the UK government’s $180m investment in the Belfast plant amount to state involvement in what should be a freely operating market. Few mainstream politicians in the West support state involvement or interference in free markets and so the bailout in 2015 is surprising. Boeing is well within its right to bring the issue to the attention of the US Commerce Department and the department itself – led by Wilbur Ross – is simply reacting to dubious – if not illegal – action by foreign governments to artificially boost a failing company.

The implementation of these tariffs will also have a more direct impact on the UK. The UK’s position in the stalemated Brexit negotiations between the Government and Brussels will likely be weakened further by this announcement; the plan was for a bespoke trade deal between the US and the UK post-Brexit but this now seems less likely. Even more pressure is likely to be exerted on David Davis and the rest of the UK’s negotiating team and the last thing the UK needs is more uncertainty surrounding its future as a free agent in the global market.

Overall the implementation of this tariff is not only perfectly legal and acceptable but in direct response to arguably illegal protectionist activity by the Canadian and UK governments. Despite how it is presented in the UK and Canadian media the US is not to blame and is simply reacting in accordance with the mandate to put America first, handed to the Trump administration by the American people on November 8, 2016.

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