In a major change for the industry, the US commerce department has decided to follow a complaint from Boeing and slap a maximum of 200% import duties on any plane made by Canadian company Bombardier after accusing Canada of unfairly granting subsidies for the aircraft, in a move that is highly likely to strain relations between Canada and the USA.
The timing is quite peculiar given that Canada and the United States are in a three-way negotiation together with Mexico to modernize the NAFTA agreement.
In the meantime, the UK government has also waded in to criticize the USA for its decision and at the same time threatening the future orders of Boeing, as the planes in question that set off the complaint in the first place, are being manufactures in a Bombardier plant in Northern Ireland (part of the UK) and could mean the loss of jobs for 4,000 UK workers. The current UK government is being supported by a Northern Irish party and loses a majority in parliament without this group.
Boeing complained that the 130 seat aircraft was sold below cost in the US market last year whilst benefiting from unfair subsidies and launched a complaint against the practice.
Bombardier has reacted to the ruling: “We strongly disagree with the Commerce Department’s preliminary decision,” continuing to call the ruling “absurd.”
The Bombardier C-Series plane starts at around $79.5 million (listing price), but Boeing claimed that but carriers received discounts of up to 50 percent. If the tariff would be imposed, this would more than triple the cost of such a plane.
The UK government has reacted with great surprise at the ruling and the UK defense department in a tit for tat move is now threatening to cancel future Boeing orders.
Defense Minister Michael Fallon: “This is not the behavior we expect from Boeing and it could indeed jeopardize our future relationship with them. Boeing has significant defense contracts with us and still expects to win further contracts. Boeing is an important investor in the United Kingdom and an important employer in the United Kingdom but we would prefer this kind of issue to be settled on a negotiated basis. This is not the kind of behavior that we expect from a long-term partner and I’ve made that very clear to Boeing.”