China trade war overshadows ABACE
Manufacturers and brokers bring aircraft to ABACE for the same purpose as sales people put cars on car lots – to promote and market their products. But, unlike cars on a dealer’s forecourt, aircraft at business-jet tradeshows do not carry price stickers. There are lots of reasons for this – not least because buying an aircraft is much more complicated and time-consuming than picking up an SUV at the weekend. But it also saves on new stickers when trade wars break out.
ABACE, which takes place this week in Shanghai, is overshadowed by the possibility of an escalating trade war between the US and China.
As part of President Donald Trump’s unilaterally proposed tariffs targeting in part what he sees an unfair trade imbalance, the US has proposed import levies on Chinese-built aircraft (it is unclear why it has done this at it is a tiny industry). China, in turn, has responded with a proposed introduction of an additional 25% tariff on imports of US-built aircraft weighing between 15,000kg and 45,000kg. This would clearly affect Boeing airliners but, if implemented, would also apply to all large business jets built in the US.
Perhaps we should ask the question: Are the threats flying back and forth between the White House and Tiananmen Square real or merely bluff? As one aircraft broker has said here in Shanghai, the Chinese are patient, they will not panic and their responses will be measured. Instead of making threatening noises, the powers in Beijing will remain calm and wait to see how the trade dispute evolves before showing their hands. The last thing the broker sees happening is for Chinese buyers to change their purchase plans and buy aircraft that will not be affected by the threatened higher tariffs.
There is a good chance that these threatened tariffs will not be imposed – both are just proposed – and there would be ways around the tariffs (including off-shore registration) but any talk of trade wars is a concern to be managed by an industry that is often driven by the strengths or weaknesses of global trade.
NOTE: The below originally appeared as the editorial in our One Minute Week newsletter. To find out more, and sign up for free, please click here.