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Trump's Tariff Plan: Overblown Consequences For Boeing?

Mar. 05, 2018 3:42 AM ETThe Boeing Company (BA)AA, GM96 Comments


  • Direct impact of tariff on production costs should be negligible for Boeing.
  • Bigger problem is the possibility of a trade war.
  • Boeing sales could suffer if tariffs were to be imposed as it directly frustrates countries in which Boeing aims to sell its jets.

On the 1st of March, President Trump single-handedly shaved off $10B off Boeing’s (NYSE:BA) market cap after he announced plans to impose tariffs on steel and aluminum imports. In this article, I want to have a look at the possible consequences of such measure for Boeing and whether this is a real reason for concern.

Afbeeldingsresultaat voor boeing trump

Source: The Post and Courier

I will start off with 3 reasons why there is little to no reason for concern, after which I will zoom out and highlight 3 reasons that could be more problematic to Boeing but also to other industries.

Reason #1 not to worry: Impact Limited

Gerelateerde afbeelding

Source: Aviation Stack Exchange

The first reason not to worry about a tariff on steel and aluminum is simply because, waste excluded, the cost component of aluminum and steel are fairly limited. AeroAnalysis ran a quick calculation on the impact of tariffs on the Boeing 787 and Boeing 777-300ER. Given recent changes on Seeking Alpha policies, those calculations will be shared exclusively with premium subscribers.

AeroAnalysis has estimated that the cost components for steel and aluminum alloys are just 1.7% of the total production costs and that is not surprising since engineering and manufacturing to specification are the major drivers of the production costs. Adding tariffs, the 1.7% percentage would increase to 1.9%. So, that is a really small differential. What is important to understand is that a 10% and 25% tariff leads to a 10% increase in material costs and just a 0.2% bump in total production costs for the Boeing 787-9.

Applying the same principle to the Boeing 777-300ER, we found that the cost components of steel and aluminum would increase from .65% to .7%.

5 Year Aluminum Prices - Aluminum Price Chart

Although aluminum alloys are often used, because alloying allows for better material properties when done correctly, aluminum remains roughly 90%-95% of

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This article was written by

Dhierin Bechai profile picture
In-depth insights from an expert on the aerospace and airline industries
Dhierin is a leading contributor covering the aerospace industry on Seeking Alpha and the founder of The Aerospace Forum. With his Aerospace Engineering background he has a more indepth knowledge about aerospace products enabling him to cover a complex niche. Most of his reports will be about companies in the aerospace industry or airlines industry, comparing products and looking at market forecasts providing investors with unique and thorough insights. Dhierin has accumulated nearly 20 million views never failing to spark healthy and thoughtful discussions for investors and aerospace professionals.

His reports have been cited by CNBC, the Puget Sound Business Journal, the Wichita Business Journal and National Public Radio. His expertise is also leveraged in Luchtvaartnieuws Magazine, the biggest aviation magazine in the Benelux.

AeroAnalysis offers wide variety of services, ranging from providing data and cost models to consultancy possibilities. Check out our website for more information. Though we believe in the strong nature of our analysis, we are in no way giving buy or sell recommendations and advise everyone to do their own due diligence before making investment decisions.

Analyst’s Disclosure: I am/we are long BA, GM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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