Al Root

Boeing finds itself caught in an escalating trade war between the U.S. and China. It hasn't been good for shares as investors watch China refuse delivery of 737 MAX jets. Whether it's an act of defiance or economic sanity is beside the point: It means less sales at a time when Boeing is trying to recover.

But Boeing has been underproducing for years, leaving customers wanting more. If China doesn't want the jets, surely someone else does. Can Boeing redirect them to other customers? In theory, yes, but it's complicated.

Jets refused by China have started to come home to Seattle, according to flight trackers. Boeing declined to comment.

The refusal came after tit-for-tat tariff escalation. On April 2, President Donald Trump announced a 34% "reciprocal" tariff rate on imports of Chinese goods. Now the rate is 145%. The rate at which China charges U.S. imports is up to 125%. According to reports, China is also restricting exports of rare earth metals, while the U.S. restricts shipments of Nvidia chips.

No Boeing imports could be a trade negotiating tactic from China. Or it could just be a function of price. It's difficult for an airline to find $100 million, or more, to pay an unexpected tax bill.

To be sure, Boeing loses out on a sale, but it has almost 4,800 orders for 737 MAX jets. Ideally, Boeing would be making close to 600 MAX jets a year. It's made closer to 300 a year for the past four years. Covid-induced supply-chain challenges and quality problems have plagued production.

So there's a silver lining for the planes China doesn't want.

It is possible to change the customer (after a new paint job and any necessary configuration changes). It's happened in the past, but it's rare. In 2022, some planes destined for China ended up in India.

It isn't likely that Boeing would move quickly. The trade war could de-escalate as quickly as it escalated. What's more, China is an important market. Boeing estimates it will need almost 9,000 planes over the next 20 years. Boeing would like to, at least, split the market with Airbus. That's more than 200 jets to China annually.

That volume isn't reflected in current backlogs. Including Hong Kong, the number of Chinese-bound jets in Boeing's s backlog is about 160, according to Vertical Research Partners analyst Rob Stallard. That's roughly 3% of Boeing's backlog. China accounts for about 6% of Airbus' backlog. "Undisclosed" customers account for about 12% of each company's backlog. Some of those planes would likely end up in China.

Reselling Chinese jets to a non-Chinese customer represents a temporary fix for the company. What it would like to do is build more jets and sell more to China.

The company will likely address the current trade environment when it reports first-quarter earnings on April 23.

Boeing stock was down 1.3% in premarket trading, S&P 500 and Dow Jones Industrial Average futures were down 1.3% and 1.1%, respectively. Coming into Monday trading, Boeing stock was down about 9% year to date.

Write to Al Root at allen.root@dowjones.com

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April 21, 2025 08:55 ET (12:55 GMT)

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