The U.S. government moved to impose tariffs on Canadian-made jetliners Tuesday when it ruled in favor of a complaint by U.S. aircraft maker Boeing that claimed rival Bombardier is receiving unfair government subsidies.
The Commerce Department suggested that the tariffs could be as high as 219 percent. The action threatens to further inflame trade tensions between the two North American neighbors. Earlier this year, Commerce moved to impose new duties on the import of Canadian soft lumber, and President Trump has signaled his interest in renegotiating the terms of the North American Free Trade Agreement (NAFTA), which involves Mexico, the United States and Canada.
Bombardier has sold aircraft to U.S. airlines for decades. But Boeing’s complaint follows a multibillion-dollar deal struck between Bombardier and Atlanta-based Delta Air Lines for 75 C series CS100s, a commercial jet that seats about 100 passengers.
Following the deal, Boeing formally asked Commerce to investigate what it called illegal Canadian government subsidies and unfair pricing practices that allegedly have given Bombardier an unfair advantage as it competes for business in the United States.
“Without bailout money from Ottawa and the Quebec provincial government [Bombardier] would probably be bankrupt,” said Loren Thompson, a defense consultant whose think tank receives funding from Boeing. “What Boeing is really saying here is that Bombardier has an unfair advantage because Canadian taxpayers are covering part of its cost.”
Bombardier is slated to begin delivering the planes next year, and any new duties imposed by the Commerce Department would apply to the present Delta-Bombardier deal, which was reached in 2016. The exact amount of any new tariffs is unlikely to be finalized until early next year. Even then, Canada could potentially pursue a case against the United States at the World Trade Organization.
A decision ultimately to impose tariffs could have ripple effects in Northern Ireland, where Bombardier has about 4,000 employees.
The Trump administration did not take an official position on the matter before Tuesday evening’s trade decision. But British and Canadian leaders have publicly urged the Trump administration not to impose tariffs.
The Guardian reported this month that British Prime Minister Theresa May raised the issue privately with President Trump after coming under political pressure in Britain. And Canadian Prime Minister Justin Trudeau suggested this month that his government might retaliate directly against Boeing through decisions on military purchasing agreements. The Canadian military is considering whether to buy Boeing’s F-18 Super Hornets for the Canadian military, and Trudeau suggested in a Sept. 18 news conference that he would abandon the purchase as a result of Boeing’s complaint against Bombardier.
“We won’t do business with a company that’s busy trying to sue us and put our aerospace workers out of business,” Trudeau said in the news conference.
Some have questioned why Boeing would wade into international geopolitics in the first place. Richard Aboulafia, an aerospace industry analyst with the Teal Group, described Boeing’s action as a “self-inflicted wound” that could damage the company’s business relationships with the Canadian military and with Delta.
“This is a dangerous moment for Boeing,” Aboulafia said. “They clearly saw this as an opportunity to walk in tandem with Donald Trump and appeal to his nationalist economic base.”
In a statement, Bombardier called the proposed 219 percent tariff “absurd and divorced from the reality” of how multibillion-dollar aircraft programs are typically financed.
“This result underscores what we have been saying for months: the U.S. trade laws were never intended to be used in this manner, and Boeing is seeking to use a skewed process to stifle competition,” Bombardier’s statement said.
Boeing hailed the decision.
“Global trade works only if everyone plays by the rules that we’ve all endorsed to ensure fair competition, as adjudicated by independent national and international bodies,” Boeing said in a statement. “This dispute has nothing to do with limiting innovation or competition, which we welcome. Rather, it has everything to do with maintaining a level playing field and ensuring that aerospace companies abide by trade agreements.”
The move follows another trade dispute between the United States and its northern neighbor. For years, the United States lumber industry had complained that because Canadian lumber is subsidized by the government, the imports make it difficult for U.S. companies to compete. Over the summer, the Trump administration called for tariffs on imports of softwood lumber. Commerce Secretary Wilbur Ross said at the time that he was optimistic that the countries would be able to “reach a negotiated solution,” and the Commerce Department recently announced a delay in proceedings to work one out.
Still, the Trump administration has generally taken a one-on-one stance toward trade, threatening to remove the United States from multinational regional accords such as NAFTA. But that has received pushback, including from Thomas Donohue, the president and chief executive of the U.S. Chamber of Commerce, who wrote in an op-ed in the Wall Street Journal this week that, “quitting NAFTA would be an economic, political and national-security disaster.”
Christian Davenport contributed to this report.