U.S reactionary imposition of 220% duty on Bombardier has larger geopolitical consequences

Bombardier is a major employer in Northern Ireland, where a handful of legislators is keeping British Prime Minister Theresa May’s minority Conservative government in power. The British government has threatened to cancel 18 Boeing F-18 Super Hornet fighter jets unless the duty structure is normalized.

The 220% duties imposed by the Trump Administration on Bombardier Inc’s CSeries jets following a complaint by Boeing, has sparked retaliation threats from Canada and Britain since the dispute could potentially effect thousands of jobs.

The dispute will cast a shadow on the North American trade talks.

This topic has loomed large at North American Free Trade Agreement (NAFTA) talks in Ottawa with Britain and Canada acknowledging that relations between Washington have become strained following the U.S. action.

The dispute has caused Bombardier’s shares and bond prices to slide lower. While its shares initially fell by 14%, they later regained lost ground and were down by 7.5% to C$2.10.

“This puts a cloud over the company with regard to the CSeries,” said Bryden Teich, portfolio manager at Avenue Investment Management. “As long as there’s this uncertainty, it will affect the share price.”

Brazil’s Embraer has however welcomed the U.S. move saying, the duties create “a level playing field in the aerospace market”.

Incidentally, Bombardier is a major employer in Quebec, where Prime Minister Justin Trudeau’s Liberals say they need to win extra seats in an election set for October 2019.

Quebec’s Premier Philippe Couillard called on Ottawa to ensure that “not a bolt, not a part, not a plane from Boeing” be allowed into Canada until the dispute had been resolved.

“Boeing may have won a battle but, let me tell you, the war is far from over. And we will win,” said Couillard who described the duties as an attack.

Responding to this, Boeing said it was not attacking Canada and the issue was a commercial dispute with Bombardier.

Meanwhile in Ottawa, Trudeau said the Canadian government was “disappointed and … will continue to fight for good Canadian jobs.”

Previously, he had said, Canada will not go ahead with its plans to buy 18 Boeing F-18 Super Hornet fighter jets unless the duty structure is normalized.

As per Francois-Philippe Champagne, Canada’s Trade Minister, the U.S. action was deplorable and one shows that Boeing is not a “trustworthy partner.”

“Our message to the Americans is to tell them that this decision will also have an impact on American suppliers and jobs in the United States,” he added.

Broader impact

The U.S. action has snowballed into a bigger battle since Bombardier is a major employer in Northern Ireland, where a handful of legislators is keeping British Prime Minister Theresa May’s minority Conservative government in power.

On Wednesday, Britain, which got dragged into the dispute, told Boeing that it could lose out on British defense contracts because of the dispute.

In a tweet, British Prime Minister, Theressa May, said she was “bitterly disappointed” by the ruling.

Boeing said it was committed to Britain.

The U.S. action on Canada is the second trade action since President Donald Trump took office. Earlier, the U.S. had imposed preliminary anti-subsidy duties on Canadian softwood lumber.

On Wednesday, Delta’s CEO said Boeing’s complaint was “absurd” and predicted the duties would not be made permanent when Commerce reaches a final decision next year.

Significantly, Bombardier, which considered bankruptcy in 2015 and is undertaking a five-year plan to improve performance and margins, is still grappling with nearly $9 billion in debt.

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Categories: Creativity, Economy & Finance, Entrepreneurship, Geopolitics, HR & Organization, Regulations & Legal, Strategy

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