Taken from Business Insider
http://www.businessinsider.com/delta-bombardier-cseries-cs100-2016-12
Recently, the U.S. Department of Commerce imposed new trade penalties that include a 79.82% anti-dumping duty as well as a 219.63% preliminary countervailing tariff on Canadian based Bombardier Inc.’s C -Series jets sold in the US. The U.S. Department of Commerce has done this in response to Boeing’s complaints that Bombardier’s planes are unfairly subsidized, and to stand up for American companies and their workers. Tariffs this large will force big U.S. companies to buy from other U.S. companies such as Boeing instead. As you can imagine, this has stirred up plenty of controversy both north and south of the border.
Effectively, this quadruples the price of Bombardier’s planes to US customers like Delta Airlines, who currently have a contract to buy 75 of these planes. Delta is clearly irate about the situation, arguing that Boeing does not even make a similar plane. “We think it’s absurd” said Delta’s CEO Edward Bastian. “We will not pay those tariffs, and that is very clear.”
Bombardier is also enraged as this tariff will seriously affect their ability to stay relevant in the U.S. market. They have filed a complaint with the U.S. International Trade Commission in the hopes of reducing or eliminating this penalty.
It is true that Bombardier is the recipient of government subsidies that helped support the development of the C Series planes. However, Boeing has received millions in subsidies from the US government in the form of federal grants, loans and loan guarantees. I understand that the U.S. Department of Commerce is trying to protect U.S. manufacturing jobs and companies, but this decision is counter-productive as it actually hurts US companies. Almost half the components of the C Series planes are actually bought from US suppliers. Those suppliers stand to lose millions if the C Series cannot be sold in the huge US market. Delta, a company that employs thousands of Americans, risks the ability to provide competitive service to their customers, because there is no other similar American-made plane. Also, trade dispute decisions like this provoke retaliation. Theresa May of the UK is upset, as she fears job losses in Northern Ireland, where Boeing has a wing assembly facility. Justin Trudeau is so infuriated with the decision that he is threatening to cancel Canada’s plans to buy 18 Super Hornet military planes from Boeing.
This entire situation is illogical and reflects the protectionist views of the Trump Administration. No country really wins in a trade war, because decisions are made out of spite rather than based on sound economics. Hopefully calmer heads will prevail when the final ruling on whether Boeing has suffered financial harm is released in February, 2018.
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