China's Tariffs on Boeing Disconcerting but Likely Symbolic
The possible tariffs only target older 737 variants, but the news sent the stock down and shares are fairly valued today.
Chris Higgins: China unveiled another list of possible tariffs for U.S. products, and for the first time the proposed tariffs target U.S. manufactured commercial jets. Naturally, the inclusion of Boeing aircraft is disconcerting for investors. Wide-moat Boeing is down on the back of the tariff news and is now triggering our 3-star rating, indicating that the stock is fairly valued. The other name we cover with significant exposure to Chinese aircraft demand is no-moat Spirit AeroSystems, and right now we think it's slightly undervalued.
The possible tariffs target aircraft with empty weight of 15,000 to 45,000 kilograms. Based on operating empty weights, China's weight range means only older 737 variants would be impacted. The newer 737 MAX variants wouldn't be impacted--noting that it's not clear whether the smallest MAX version (the -8) would be subject to the tariff or not, due to possibly different definitions of "empty weight." Wide-body aircraft like the 787 or 777 are clearly excluded.
Chris Higgins does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.