U.S.'s leading export business was already struggling. However, tariffs made matters worse.
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Boeing's turbulent years have seen numerous challenges. potential tariffs could be a painful blow to the struggling firm - and if you think about it, Boeing's significance as the number one US exporter makes this a concern for the whole economy.
Boeing's aircraft might face hefty price increases if other countries slap tariffs on US goods. Already existing US tariffs could drive up the cost of building planes within the country, due to Boeing's dependence on foreign suppliers.
This would add to the woes caused by safety and quality control failures leading to fatal crashes and groundings, a strike shutting down production, and the decline in air travel demand during the Covid-19 pandemic.
Tariff troubles are the last thing Boeing needs right now, said Ron Epstein, an aerospace analyst at Bank of America. And the alarm bells are already ringing over the possibility of a US recession. Tariffs on aircraft and airplane components could hamper production at aerospace factories, as well as their suppliers, potentially pushing the economy over the edge.
"If you're thinking about a manufacturing industry that is a net exporter, in a big way, why would you want to penalize it?" he said.
Boeing executives assured investors they believe that the Trump administration will ease tariff worries.
"I don't think a day goes by where we aren't engaged with someone in the administration, including cabinet secretaries and up to POTUS himself," Ortberg told investors. "So this is a dynamic environment."
Ortberg mentioned that Boeing's discussions with the administration suggest that Trump understands "the importance of the aerospace industry to the US economy and the role that Boeing plays as a top US exporter."
In spite of its problems, Boeing estimates it supports 1.6 million jobs, directly and indirectly, including nearly 150,000 US employees.
Perhaps the first sign of trouble came over the weekend, when two planes at a Boeing facility in China were returned to the company's Seattle facility instead of going to their Chinese customers due to a 125% tariff on any US imports. This retaliation for the US tariff of 145% on most Chinese imports. Ortberg confirmed the return of two planes from China in comments to investors, and he said a third plane is expected to return due to the tariffs.
China's problems, Boeing's problems
The returned jets could just be the beginning of Boeing's trade hassles.
China is the largest and fastest-growing market for commercial jets. Boeing's recent analysis predicts that Chinese airlines will purchase 8,830 new planes over the next 20 years, representing 10% to 15% of global demand, according to Richard Aboulafia, managing director at AeroDynamic Advisory. However, the trade tensions between America and China have already caused Boeing to lose ground to its European rival Airbus.
Chinese customers ordered 122 Boeing planes in 2017 and 2018. But in the six years since, orders have plummeted to just 28 planes, mostly for freighters or from Chinese leasing companies that may be buying them for airlines outside China. Boeing hasn't reported a single order for a passenger jet from a Chinese airline since 2019.
On Wednesday, Boeing reported a smaller-than-expected 49-cent-a-share core operating loss in the first quarter. Ortberg pointed to several signs of improvement in company operations in a note to employees, but he admitted that trade issues could be a problem in future results.
Boeing still has a massive backlog of orders from Chinese airlines - 195 planes, according to Epstein's analysis. It also has orders for 678 additional planes from unidentified airlines, most of which are likely from China, Epstein said.
The company may be able to find alternative buyers if its Chinese jet orders are canceled, thanks to its multi-year global order backlog. Ortberg said the company had planned to deliver about 50 planes to China this year, and that it should be able to find other buyers for those jets, assuming the tariffs on US exports to China remain in place.
"There's plenty of customers out there looking for the Max aircraft," he said. But if other countries impose tariffs on American aircraft, that could be a harder sell.
So far only China has imposed retaliatory tariffs on US goods, but other countries could follow. Boeing, a major exporter, could then become a bargaining chip in the global trade war, even though it would also hurt international airlines in need of planes, said Epstein.
"Boeing is an easy target," he said. "Tariffing Boeing is an obvious thing to do."
Soaring building costs
But selling and delivering planes is only part of the problem for Boeing. Building them could become an issue, too, as it depends on foreign-made parts for about 80% of its planes' content, according to Ortberg's congressional testimony.
The wings on the 787 Dreamliner, Boeing's most valuable and expensive plane, come from Japan, for example.
The door plug that blew out, mid-air, from a 737 Max in January 2024 came from a supplier in Malaysia - though the problems were caused not by the supplier but by Boeing, which did not replace four bolts needed to keep the door plug in place.
Finding new American suppliers could be especially tough: each new US part and supplier would need to be recertified by the Federal Aviation Administration, a process that can take more than a year.
That leaves foreign parts - and tariffs to pay, raising the cost of building an already $50 million to $100 million aircraft by millions more.
Boeing hasn't reported a full-year profit since 2018, running up a combined $51 billion in operating losses since then.
And suppliers are in even worse shape. Spirit AeroSystems, which Boeing is purchasing, has warned investors of "substantial doubt" about its ability to stay in business.
Ortberg told investors that the company believes it can handle any levied tariff costs as part of its ongoing financial plans. That is partially because the company expects to get credits, known as "drawbacks," on the cost of tariffs if a plane it builds is then exported. He said the net cost of the tariffs on imported parts will end up being less than $500 million annually, which CFO Brian West described as "manageable."
- Tariffs on aircraft and airplane components could significantly impact the aerospace industry, particularly Boeing, as a hefty price increase on Boeing's aircraft might be imposed due to tariffs on US goods in other countries.
- The aerospace analyst at Bank of America, Ron Epstein, stated that if tariffs are imposed on aircraft, it could potentially hamper production at aerospace factories, as well as their suppliers, which could potentially push the economy over the edge.
- The return of two planes from China to Boeing's Seattle facility due to a 125% tariff on any US imports could be a sign of more trade hassles for Boeing, as China is the largest and fastest-growing market for commercial jets.
- Boeing still has a massive backlog of orders from Chinese airlines, and although it may find alternative buyers if its Chinese jet orders are canceled, other countries imposing tariffs on American aircraft could make it a harder sell.
- Amongst the various challenges faced by Boeing, the soaring building costs due to the dependence on foreign-made parts for about 80% of its planes' content, and the need for new US parts and suppliers to be recertified by the Federal Aviation Administration, could add significantly to the cost of building an already expensive aircraft.
