Fight or Flight? Boeing and the Intensifying Risk of a Global Trade War

The United States is at extreme risk from a global trade war due to its heavy Boeing exposure. Boeing planes are front-and-center targets in a contentious debate over protectionism.


Commercial aircrafts are the backbone of the American economy. Amounting to $121 billion dollars, or 23% of total U.S. outbound trade, civilian aircrafts are manufactured by the Boeing Corporation[1]. Boeing controls nearly one hundred percent of U.S. civil aviation manufacturing and is the largest aircraft manufacturer in the world[2]. It is estimated that nearly 80% of the U.S. economy is in some way affected by the civilian aircraft sector, through manufacturing, supplies, subcontractors, and by-products of aircraft production[3].

The United States economy is at extreme risk of trade collapse due to its heavy Boeing exposure. Boeing aircrafts are front-and-center targets in a contentious debate over export subsidies and trade policy adherence. Given the long life of aircrafts, which can remain in service for over 20 years, and the lengthy training needed upon purchase, there is a strong incentive to stick with one aircraft type and brand over time[4]. Accordingly, competition for customers is severe.

Historical Context

Despite fierce competition, the U.S. aircraft industry initially supported free trade[5]. By the 1980s, this position began to change with U.S. aircraft manufacturers inching towards protectionism. This shift is attributable to two reasons: 1) an increase in the cost of designing large aircrafts, and 2) deregulation of American and European airlines impacting airline demand[6]. The former increased the scale of manufacturing needed for breakeven profitability. The latter changed consumer demand behavior, principally increasing demand for smaller planes that offered wider range. This behavioral shift prompted all manufacturers to produce more of the same type of aircraft to win over marginal customers, breaking into competitor’s longstanding niches.

By the 1990s, both European Union and the United States implemented aircraft subsidies, prompting international ire. Through a series of trade negotiations, the international community agreed to ban export subsidies. Since the 1994 signing of the Global Agreement on Tariffs and Trade, however, both the U.S. and E.U. have claimed malfeasance[7][8].

Another crucial element of aircraft trade wars is the role of export financing. In the United States, the Export Import Bank, for example, provides loans to customers of U.S. businesses. Some executives have referred to this lending as a “predatory export financing war,” as it inhibits global competition, claiming that the Ex-Im Bank is in effect “Boeing’s Bank”[9].

Short & Medium-Term Solutions

Boeing has spent too much time disputing trade. Just this past October, Boeing filed a complaint with the U.S. Commerce Department, arguing that Canadian plane manufacturer Bombardier “dumped” planes into the United States. Boeing alleges that Bombardier was able to sell the planes to Delta below list price due to $2.8bn of subsidies and direct investments from the Canadian government. The irony is that Boeing too benefits from U.S. government support—upwards of $5bn in annual subsidies[10]—not to mention outright Defense Department purchases of Boeing planes which comprise 23% of the company’s revenue[11]. Boeing is also the largest beneficiary from the Ex-Im Bank, which has provided $12 billion annually in loans to Boeing customers[12].

The Commerce Department responded to Boeing’s complain by levying a 300% duty on the Bombardier planes – a 220% tariff to compensate for tariffs and an additional 80% as a punishment for “undercharging” Delta. This has backfired against Boeing, with Bombardier deciding to sell its C series business to Airbus, which will now manufacture the planes in Alabama, dodging the tariff entirely. This saga demonstrates the extent to which companies will be creative to circumvent trade regulations, increasing competitive pressures against Boeing[13].

Airbus Head of Communications Opines on Boeing’s Complaint to the U.S. Department of Commerce, Source: Twitter


Competition Across Short-Haul Jets, Source: Financial Times

Boeing is, nonetheless, making small strides to address protectionism. Boeing is working with foreign customers to assemble and manufacture planes in foreign countries. In 2017, it is projected that a quarter of Boeing’s revenue will come from Chinese purchases[14]. Boeing leaders have realized that a shift in trade policy towards or coming from China could have “catastrophic effects” on Boeing’s profitability[15]. In turn, Boeing has announced that it will manufacture Chinese-airline planes in a facility near Shanghai.

Over the medium term, Boeing will need to continue to think strategically about the placement of its finishing centers. Further, Boeing needs to grow the diversity of its client relationships[16]. This would address geopolitical concentration risks, shielding the company from any specific bilateral trade spats. A diversifying customer base also addresses counterparty financing risks, particularly important as the fate of the Ex-Im Bank is very much in question with the current U.S. administration[17]. If this bank is no longer able to provide financing to Boeing customers, Boeing needs to be able to pull from a deep bench of global partners, from the developed and developing world, to maintain profitability.


Over the long term, Boeing needs to lead the U.S. aviation industry in upholding free-trade, leading by example. Instead of rallying against competitors for using subsidies, Boeing should urge the U.S. government to return to WTO talks to support free trade. So long as the U.S. favors Boeing, competitors will continue to find creative ways to restore their competitiveness; protectionism makes those shut out fight harder[18]. Boeing should recognize that it is very much the pot calling the kettle black and should think dynamically about engaging with international customers and their governments.

To that end, Boeing should anticipate increased competition from areas besides Europe, namely the emerging world. In 2016, China and Russia established the China-Russia Commercial Aircraft Company, which will develop a twin-aisle airliner to compete with Boeing’s 747 and Airbus’ A350[19]. Given the ascendance of emerging markets, it is inevitable that there will be increased competition. Boeing should accept this fact and conceive creative ways to engage with new entrants in the space. This could include licensing technologies to competitors or identifying a niche product where Boeing’s technological innovation will sustain a competitive moat.

Prototype of China-Russia Commercial Aircraft Company Airliner, Source: COMAC

Open Questions

Many strategic questions still loom for Boeing. On the marketing front, does it make sense for Boeing to align itself with the U.S. government when opining on trade policy? Should Boeing crystallize its own, independent trade policy? To send a message to global customers, should Boeing look to shrink its revenue exposure to the U.S. Department of Defense? How can Boeing incorporate global markets and labor into its manufacturing process to promote good will across nations? Should Boeing carry this burden, or should it pressure the U.S. government to reject protectionist policies?

(Word Count: 1000)


[1] United States Census Bureau, “U.S. International Trade in Goods and Services,” September 2017, U.S. Department of Commerce.

[2] Daniel I. Fisher, “Super Jumbo Problem: Boeing, Airbus, and the Battle for the Geopolitical Future”, pp.865, Vanderbilt Journal of Transnational Law (2002)

[3] United States International Trade Commission, “Global Competitiveness of United States Advanced Technology Manufacturing Industries: Large Civil Aircraft,” 1993

[4] David B. Yoffie, Helen V. Milner, “An Alternative to Free Trade or Protectionism: Why Corporations Seek Strategic Trade Policy”, California Management Review , pp. 119, Vol 31, Issue 4, pp. 111 – 131, First Published July 1, 1989.

[5] Ibid, Yoffe & Milner, pp. 120.

[6] Ibid, Yoff & Milner, pp. 121.

[7] World Trade Organization, DS316 “European Communities – Measures Affecting Trade in Large Civil Aircraft”.

[8] World Trade Organization, DS353, “United States — Measures Affecting Trade in Large Civil Aircraft — Second Complaint”.

[9] Jack Pierce, (Boeing Treasurer), Testimony at Hearing before the Senate Subcommittee on Export-Import Bank Extension, 97th Congress, March-April 1978, p. 551; James McMillan, (V.P, McDonnell Douglas), Testimony at Hearings on Export Policy, Part 4, before the Senate Subcommittee on International Finance and Commerce, on “Banking, Housing, and Urban Affairs,” 95th Congress, March-April 1978.

[10] Albert Otti, Alexandra Mayer-Hohdahl, “LEAD: Boeing Loses Latest WTO Round in Subsidy Dispute with Airbus”, McClatchy – Tribune Business News, March 12, 2012.

[11] George Will, “The Radiating Mischief of Protectionism,” Washington Post, October 27, 2017.

[12] George Will, “Export-Import Bank’s Damage to American Firms,” Washington Post, March 16, 2012.

[13] Peggy Hollinger, “Airbus Bets on Demand for Bombardier’s ‘Cute Little Plane’,” Financial Times, October 17, 2017.

[14] Jon Ostrower, “Boeing Pitches China Facility As Trump-Friendly”, CNN, January 25, 2017.

[15] Ibid, Ostrower.

[16] Boeing,

[17] Karen Walker, “Planes, Politics, and Protectionism,” Air Transport World, October 18, 2017.

[18] Peggy Hollinger, “Airbus Bets on Demand for Bombardier’s ‘Cute Little Plane’,” Financial Times, October 17, 2017.

[19] Jon Ostrower, “China and Russia are Coming for Boeing and Airbus,” CNN, May 23, 2017.


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Student comments on Fight or Flight? Boeing and the Intensifying Risk of a Global Trade War

  1. Very informative piece about the effects of protectionism on Boeing and its outsized role in determining policy and trade relations going forward. I was not aware of the Export-Import bank’s role in promoting protectionism or the extreme degree to which Boeing contributes to and is intertwined with the US economy.

    It does appear that the Bombardier conflict backfired against Boeing, but did it backfire against the US government’s protectionist agenda? Ultimately, Bombardier moving manufacturing to Alabama created highly-coveted American jobs in what were probably struggling, post-industrial areas of the country. Without knowing the details of Bombardier’s move to Alabama and any relocation incentives they may have received, it is difficult to evaluate the true benefits of this outcome for Americans.

    This absence of transparency also impairs the ability of the average American to understand the true ramifications of free trade negotiations. For example, it may well be that Boeing will improve US-Chinese relations by using more Chinese components and manufacturing, but the layperson cannot quantify that improvement or evaluate alternatives without knowing exactly what transpired in negotiations to produce that result.

    1. Very valid points, Ryu. Without information on the number of jobs gained through Bombardier Alabama plants vs. lost by Boeing (although they never seemed to bid for the C-series to begin with…), it’s hard to assess the impact on the U.S. It is quite likely that this ended up being a net positive for the U.S. The real concern, however, is that countries ultimately get fed up with such protectionist measures and end up finding other trade partners or assemble their planes without any Boeing components at all.

  2. I overwhelmingly agree with your assessment that protectionist policies are hurting Boeing, and energizing their competitors. One more addition to the growing list of consequences following the tariffs: in addition to affecting 80% of the domestic economy, the civilian aircraft industry is deeply rooted in foreign economies as well. OEMs such as Boeing and Bombardier employ thousands of workers abroad. As a result of the tariffs and implications on the plants supplying Bombardier, governments in the UK and Canada have threatened to dismantle the military contracts they have with Boeing as a sign of retaliation for the OEM’s protectionist response ( With that in mind, Boeing’s outsourcing strategy is at risk: Can they still rely on their global supply chain when they’re on the bad side of many foreign governments? Will a change in administration affect their current protectionist policy?

    1. Very interesting, did not consider this from the angle of Boeing workers abroad. I agree with you, I think the ongoing risk of Boeing’s dependence on protectionism is that it comes back to bite their workers, their trade partners, and their clients.

  3. I completely agree with your perspective of Boeing being at a strategic crossroads between leading the world as a global manufacturer or focusing more and more in its domestic captive market.

    Although emerging markets are still far from reaching Boeing’s production rates and costs, China poses a serious threat to established aircraft manufacturers (Boeing and Airbus). As an example, COMAC has apparently signed 130 orders for their C919 jet, which made its maiden flight in May 2017 (

    I personally think that Boeing is wrong if it tries to align with US Government protectionist trade policies due to several reasons. First, emerging markets are going to drive growth in the years to come. Creating a “Made-only-in-the-US” brand won’t help the company sell more planes abroad. Second, Airbus, its main current competitor, has already a multi-national supply chain and manufacturing network. Leveraging on this experience it will be easier for Airbus to emerge as a true global manufacturer and include other developing countries (i.e. clients) in its network. By aligning with US Government protectionist policies, it will be hard for Boeing to compete against Airbus to capture the expected growth from emerging markets. Finally, Boeing should create and leverage an extensive global footprint to prevent other important emerging economies, which might feel excluded from the benefits of this industry’s growth, from creating their own aircraft manufacturer.

    1. Interesting points Roger. I agree, Boeing could really benefit from being the largest player in the space by embracing global markets, using its footprint to win partners in emerging economies.

  4. I agree with most people’s views that it is short-sighted for Boeing to align with U.S. government’s protectionist policies. From a macroeconomic perspective, government subsidies and outsized tariffs negatively impact free market forces and can deter healthy competition and innovation in the industry. While this may benefit Boeing in the short term, overly protectionist policy may hurt Boeing in the medium to long run. Other governments (i.e. China and Russia) may decide to pour even more resources into developing their domestic aviation industries, leaving Boeing at a disadvantage both commercially as well as at the trade negotiations.

    One consideration for governments to support the aviation industry may be for strategic purposes. The department of defense and the U.S. military could be gaining a crucial edge over other countries due to the new technology developed at Boeing. This raises interesting questions around how should one promote free-market policies in an industry with military and strategic interests.

    1. Interesting point Dong, re: military and strategic interests. To Ryu’s earlier comment, it is difficult to quantify the strategic benefits of such entrenched military interest in Boeing as there is limited data (if any) on the impact of the relationship on the military’s strategic edge. Perhaps it’s worth comparing Boeing/U.S. military prowess versus military innovations in countries that don’t have a strong relationship with a manufacturer (i.e. Japan, Russia, Singapore, Russia). But how to quantify such a comparison? – that remains an outstanding question.

  5. This interesting story reminded me about how Japanese car makers shifted to global production from domestic production after international trade wars. If Boeing wants to keep its leading position against looming new competitors, it should think beyond seeking US government support and driving tariff wars. If Boeing diversifies its production location globally, it can expand customers from its new regional supply network, and also reduce political risk of sudden tariff surge from bilateral foreign trade wars. On the other hand, loss of domestic job would be the biggest political obstacle under the current US government.

  6. Fantastic essay Rhonda! I was shocked to learn that approximately 80% of the US economy is tied to the civilian aircraft sector in one way or another. Boeing is going to face significant challenges moving forward as they attempt to fend off the competition. Developing countries are a key target market for airline companies and Boeing likely needs to capture market share to grow; with a product lifetime of 20 years, jet replacement sales represent a stagnant market value in the US. Boeing needs new customers abroad, and manufacturing planes internationally is a good way to signal to foreign countries that Boeing is not looking for special treatment from the US government. Tripping up competitors who attempt to sell into the US market is a slippery slope. In my opinion, battling competition on trade restrictions is a short-term solution to a much longer-term growth problem that Boeing must tackle in the coming decades.

  7. This is an amazing essay Rhonda. I have a couple of points I would like to make in terms of protectionism and Boeing’s role when it comes to U.S. policy. I completely agree that Boeing should try to manufacture in emerging markets and as you mentioned they recently opened a completion center in China in order to show good faith and more effectively compete for market share in this space. However, the interesting balance here is how does Boeing protect it’s intellectual property from a government that is desperately trying to build it’s own commercial airplane as quickly as possible and eliminate foreign players from its market?
    In terms of protectionist policies and the role Boeing must play, I find this topic more debatable. A look to the past shows as that McDonald Douglas, an American OEM, disappeared once Airbus was able to successfully enter the market. Airbus ultimately outcompeted Douglas on price due to its government subsidies. Given that now Boeing and Airbus are interlocked in a battle for market share on a global should the governments of both of these OEM’s be worried by the emergence of new entrants such as Bombardier and Comac? Could one of these new entrants potentially replace Boeing or Airbus?

  8. Given the significant impact of Boeing on the U.S. economy, any strategic consideration related to trade policy requires careful evaluation on behalf of Management. In the bigger scheme of things, and in first instance, Boeing has an obligation towards its shareholders and employees, making business performance a primary objective. In that context, the U.S. government seems to be a strong partner, as its annual subsidies and contribution to plane orders (e.g. through the Defense Department) directly affects Boeing’s competitive edge.

    I would therefore strongly advise to align any trade policy considerations with the US government. Any independent moves, are set to negatively affect Boeing stand-alone as competitors are likely to continue benefiting from their government support. In case Boeing intends to encourage free trade and “lead by example”, it should therefore engage in a broader dialogue with other globally-operating aircraft manufacturers to advocate a general mindset shift across the industry. Any measures will then (ideally) affect all players on an equal basis.

  9. Great article Rhonda! Given Boeing’s reliance on the Federal government, it has little option than to align with the government’s trade policies. Since a significant amount of Boeing’s revenue comes from defense contracts, they may jeopardize this income by pushing back against trade policy. Additionally, the US government does provide a significant subsidy to Boeing, thereby, making it a very valuable and supportive partner.

    Boeing’s history has indicated a trend away from protectionism in instances where it has benefited their bottom line. For example, much of the 787 was manufactured abroad, likely due to cheaper manufacturing costs. Based on these practices it is clear that Boeing favors globalization when it benefits their profits and protectionism when necessary. This strategy makes sense since as a company Boeing has an obligation to it’s shareholders to maximize value. How policy affects that value will keep Boeing on it’s feet and likely away from any hardline policy positions.

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