Global Trade Spat Unnerves Plane Makers

By Andrew Tangel and Robert Wall 

LONDON -- Aerospace executives at plane makers Boeing Co. and Airbus SE, along with their suppliers, said they are worried new trade barriers could drive up plane manufacturing costs and lead airlines to put off purchases.

"Aerospace thrives on global trade -- free and open trade," Boeing Chief Executive Dennis Muilenburg said in London on Sunday ahead of the Farnborough International Airshow, the industry's flagship gathering that kicks off Monday.

"We're concerned about some of the ongoing talk about tariffs and trade restrictions," the head of the U.S.'s largest exporter told reporters, though he added that there had been no material effect on company so far.

Earlier this month, Tom Enders, chief executive of European rival Airbus, said protectionist sentiments could dampen global growth. "There are some clouds on the horizon," he said. "We're on the brink of a trade war" between the U.S. and China as well as with Europe, he said.

Worries over shifting trade policies, new tariffs and other barriers come as plane makers including Boeing, Airbus and Embraer are looking to tout their latest deals to drum up buzz and new business.

The Trump administration this year imposed tariffs on a range of imports from aluminum to washing machines from China, the European Union and others, saying previous trade deals treated the U.S. unfairly and threatened domestic jobs.

Airlines are currently in buying mode amid rising world-wide passenger demand, and airplanes have so far largely avoided being targeted by tariffs from the U.S. and China The U.S., though, has taken aim at some airplane parts imported from China. China had threatened to target finished jetliners, but so far hasn't.

The U.S. clash with China is particularly fraught for Boeing because it has big business in both countries. Boeing is forecasting industrywide demand growth over the next two decades: 43,000 commercial planes worth nearly $7 trillion, up from 41,000 forecast for the next two decades last year. Of that, 7,200 planes should go to China.

In a May 11 letter to the U.S. Trade Representative's office, Boeing executive Timothy Keating said such tariffs could threaten Boeing's access to China, which could retaliate by slowing or refusing imports of Boeing commercial jetliners, opening the door for rival Airbus.

Mr. Muilenburg on Sunday expressed hope that both U.S. and Chinese leaders would recognize what he described as the two countries' symbiotic relationship, crucial to growth and job creation.

China is expected to become a driver of global demand for commercial planes in coming years, he said, adding: "They need the lift, the aerospace capability to help drive the rest of their economic growth agenda."

Gaël Méheust, chief executive of engine maker CFM International, a joint venture of General Electric Co. and France's Safran SA, said, "We're really hoping that this is just politics and this will not affect, in the long-run, the economy."

Trade is only one of the potential threats to an almost decadelong period in airline passenger growth, Mr. Méheust said. A drop in cargo demand, often a leading indicator for air traffic, rising oil prices and labor cost inflation are "an indication things may not be as good as we want."

Brazilian airliner maker Embraer SA said it is worried about the currency effect for the dollar-denominated industry amid the trade conflict. Chief Executive Paulo César de Souza e Silva said in an interview that "a much stronger dollar vis-à-vis local currencies can cause more challenges for the airlines."

Write to Andrew Tangel at [e-mail] and Robert Wall at [e-mail]

(END) Dow Jones Newswires

July 15, 2018 16:43 ET (20:43 GMT)

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