Boeing hit to US economy a worry for Trump re-election bid

President Donald Trump is counting on a strong US economy to seal his reelection victory but the Boeing crisis and ongoing trade frictions could undermine that strategy.

Trump on Wednesday criticized Boeing as a "very disappointing company" because of the aerospace giant's recent problems after the grounding of the 737 MAX plane, which are having knock-on effects for the broader economy.

He has also criticized the Federal Reserve for mishandling monetary policy, which he says is also holding back the US economy.

Other scapegoats include Europe and China for trade policies he says take advantage of or steal from the United States and any country with a weak currency against the US dollar.

And as the impeachment trial against him proceeds in the Senate, Trump, of course, has blamed Democrats for launching into a political attack that is distracting from his policy priorities.

However, no matter whom he chooses to cast as a culprit, the data show it is the trade wars Trump launched with multiple trading partners that are having the biggest effect, causing investment to screech to a halt amid widespread uncertainty.

Still, he is right about the potential damage from the travails at Boeing, which halted production of top-selling 737 MAX aircraft after they were grounded following a pair of deadly crashes. The MAX's return to the skies has been beset by delays.

Heading into the final months of the 2020 presidential elections, Trump has repeatedly touted the record stock exchange levels, and his partial trade deal with China.

But economists warn that the trade agreement signed this month is a patch that eases only some of the uncertainty about new tariffs, and leaves two-thirds of the products traded between the economic powers still subject to punitive duties.

And while Trump in Davos promised a middle-class tax cut and touted his economic success -- "we've done so much" -- he also renewed his attacks on the European Union and again threatened to strike back with crippling tariffs on imported cars.

Continued uncertainty over trade could drag US growth below 2.0 per cent.

Analysts at Oxford Economics warn "conditions aren't yet in place for an industrial rebound," noting that consumer spending softened at the end of 2019.

The IMF this week trimmed its US growth forecast a tenth to 2.0 per cent for this year, and to 1.7 percent in 2021, saying trade uncertainty continues to weigh on the global outlook.

US Treasury Secretary Steven Mnuchin said Tuesday the grounding of the MAX, together with slower global growth, had shaved some 0.5 to 0.7 percentage point off the US growth rate -- but he said the IMF estimates are too low.

"This is one of the great companies of the world, let's say as of a year ago, and then all of a sudden things happen," Trump said in an interview on CNBC from the economic forum in Davos, Switzerland.

This "had a tremendous impact," he said.

"You know when you talk about growth, it's so big that some people say it's more than a half a point of GDP. So Boeing -- big, big disappointment to me."

Oxford Economics projected last month the MAX production shutdown could slash half a point off US the economy's annual growth rate in the first three months of this year, accounting for slower investments and exports.

And while Boeing has reassigned its own workers, one key supplier -- Spirit AeroSystems -- laid off 2,800 employees this month.

Things could get worse if the stoppage drags on -- cutting 0.2 percentage points off growth for the full year, according to IHS Markit.

Boeing on Tuesday officially pushed back the time frame for the 737 MAX to return to the skies, until mid-2020.