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Weight key to China's tariffs on aircraft

By PAUL WELITZKIN in New York | chinadaily.com.cn | Updated: 2018-04-09 23:01

Last week in response to US President Donald Trump's proposed $50 billion in tariffs on certain Chinese-made products, China said it was considering a tariff on US-produced aircraft with a so-called empty weight of between 15,000 kilograms and 45,000 kilograms.

Industry observers said the impact of the tariffs will depend on how "empty weight" is defined and measured.

"Depending on the weight issue it may also impact the [Boeing] 737 family and potentially larger business jets," said Blaise Waguespack, marketing professor at Embry-Riddle Aeronautical University in Daytona Beach, Florida, in an interview.

Boeing has a sizeable backlog of airliners destined for China, but most are currently over the current tariff weight limits, according to Brian Foley of the aviation consultancy Brian Foley Associates.

"If the tariff impact to Boeing is isolated to the 737-700 and MAX 7, which account for less than one percent of the backlog, the impact to earnings is limited," Morgan Stanley analysts said in a research note, according to TheStreet.com.

China's tariff proposal in its current form is concerning, but not catastrophic to most manufacturers, said Foley.

"However, if the current weight limit is moved higher, it would strongly affect airliners. If moved lower, more business jets will be impacted," he added.

Foley doesn't believe that business jets were specifically targeted by China. "Rather they were collateral damage from an effort aimed primarily at Boeing commercial airliners. It's still not clear whether business aircraft could eventually be exempt," he said.

"The largest business jets from Gulfstream (owned by General Dynamics in the US) are within the weight category defined by the proposed tariff (but) China likely represents a rather small percentage of the company's overall backlog," said Foley.

Other business jet manufacturers such as Dassault Aviation SA of France, Embraer from Brazil and Bombardier from Canada may be exempt from the tariffs "even though they may have some US content and facilities," said Foley.

US aircraft exports to China totaled about $15 billion in 2016.

The impact of that decision is likely to be discussed at the Asian Business Aviation Conference & Exhibition that is scheduled for April 17 in Shanghai said Waguespack.

"I am almost certain this will be a prime topic at the conference, which is similar to the one put on by the National Business Aviation Association (NBAA) in the US, which is the biggest trade show in the world for corporate jets," Waguespack said.

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