The Commerce Department has announced that it is hitting Canadian aircraft maker Bombardier with a hefty 220 percent tariff for its top-end passenger planes. The tariff follows the department’s preliminary finding in favor of U.S. rival Boeing’s complaint that the smaller company received unfair government subsidies.
The trade row is over the Montreal-based Bombardier’s 100- to 150-seat C-Series passenger jets.
Bombardier has seen its stock price drop since Tuesday’s announcement by Commerce and the move has also angered the U.K. because the aircraft maker is one of Northern Ireland’s largest employers. About 1,000 jobs at the Belfast plant that are directly linked to the production of the C-Series wing could be lost, officials say.
The Canadian company has called the ruling “absurd” and promised to fight it. Boeing has said it only wants “a level playing field” in the U.S. market for single-aisle planes. In a statement Tuesday, the Chicago-based manufacturer of the 737 described Bombardier’s “massive illegal subsidies” as a “violation of existing trade law.”
In June, the Commerce Department made an initial finding that Boeing may have been harmed by Bombardier, which it says was able to sell its plane in the U.S. at a substantial discount. Although Commerce says it will “instruct U.S. Customs and Border Protection to collect cash deposits from importers of 100- to 150-seat large civil aircraft based on these preliminary rates,” the decision won’t be final until next year.
In the meantime, Bombardier’s sole U.S. contract for the CS100 is with Delta Airlines and it wasn’t expected to deliver the first of that 75-plane order until next spring. So Tuesday’s ruling has no immediate practical effect other than indicating the direction in which the Commerce Department is likely to move.
The Guardian writes: “The extra charge would more than triple the cost of a C-Series aircraft sold in the US to about $61 [million] per plane, based on Boeing’s assertion that Delta received the planes for $19 [million] each.”
Tuesday’s finding bolsters Boeing’s claim that a $1 billion bailout from the Quebec regional government and $149 million in development loans and other aid from the U.K. government in 2008 helped give Bombardier an unfair advantage.
The Commerce Department said in a Fact Sheet released Tuesday that it used reported information from the governments of the U.K., Canada and the provincial government of Quebec, to calculate the tariff rate of 219.63 percent.
“The U.S. values its relationships with Canada, but even our closest allies must play by the rules,” Commerce Secretary Wilbur Ross said in a statement.
“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,” he said.
The U.K.’s defense minister, Sir Michael Fallon, warned that the move could “jeopardize our future relationship” with Boeing, which enjoys billions of dollars in military contracts with Britain.
During a visit to Belfast, where Bombardier’s U.K. operations are based, Fallon said: “Boeing stands to gain from British defense spending” but that “this kind of behavior could jeopardize our future relationship” with the firm, according to the BBC.
“We don’t want to do that. Boeing is an important investor in the United Kingdom; an important employer in the United Kingdom,” he said. “We would prefer this kind of dispute to be settled on a negotiated basis and we will be redoubling our efforts with the Canadian government to bring about a negotiated settlement.”
British Prime Minister Theresa May said she was “bitterly disappointed” by the tariff ruling.