A costly trade war between the U.S. and its neighbor to the north – Canada, can be the result of a ruling by the U.S. Commerce Department about the alleged subsidies for airplanes built in Canada.
There have been allegations made by Boeing against its rival and the Canada-based aircraft maker Bombardier that it has been receiving government subsidies which was allowing it to sell its new C Series airplane at a steep discount. And Boeing found the ruling in its favor at the International Trade Commission, a committee within the Commerce Department.
And a 219.63 percent tariff, far higher than what Boeing was proposing, could be slapped on the planes of Bombardier, determined the ITC apart from agreeing to the allegations made by Boeing.
“The U.S. values its relationships with Canada, but even our closest allies must play by the rules,” said Commerce Secretary Wilbur Ross. “The subsidization of goods by foreign governments is something that the Trump Administration takes very seriously, and we will continue to evaluate and verify the accuracy of this preliminary determination.”
The ruling was however described as being absurd by Bombardier.
“This result underscores what we have been saying for months: The U.S. trade laws were never intended to be used in this manner, and Boeing is seeking to use a skewed process to stifle competition and prevent U.S. airlines and their passengers from benefiting from the C Series,” the company said in a prepared statement.
In 2016, Delta air had ordered up to 125 Bombardier C Series planes and this is at the center of the controversy. The list price of the Bombardier planes was $80 million each and Boeing claims that each aircraft was sold by Bombardier for millions less than the list price. The specific allegation of Boeing was that government subsidies by the Canadian government was the reason that Bombardier was able to undercut the price of a Boeing 737.
“Subsidies enabled Bombardier to dump its product into the U.S. market, harming aerospace workers in the United States and throughout Boeing’s global supply chain,” Boeing said in a statement after the Commerce Department ruling.
Boeing had also placed another complain against Bombardier claiming that the Canadian aircraft maker dumped its planes in the U.S. at unfair prices and the ITC could impose another tariff on C Series planes when it rules this Boeing next week.
On the other hand, Canada has been prompted to threaten that it may cancel a $5.2 Billion order for Boeing F/A-18 Super Hornet fighter jets as the Commerce Departments decision has been expected for weeks.
(Adapted from CNBC)