Boeing announced a $16.6 billion deal on Sunday to sell planes to Iran, which for decades had been economically blacklisted by the United States. The company instead chose to emphasise how many jobs the sale would support.
“Today’s agreement will support tens of thousands of US jobs” associated with the production and delivery of the planes, Boeing said in its news release. The intended recipient of Boeing’s message clearly seemed to be President-elect Donald Trump.
Its carefully worded statement is emblematic of the tightrope that the US’ biggest exporters are walking amid his threats to shake up trade policy and undo the Obama administration’s nuclear accord with Iran. That agreement lifted the US sanctions on Iran, making Boeing’s jet deal possible.
Trump has talked about imposing tariffs on imports from China and on US companies that move jobs to Mexico and other countries. But he has not said much about how some of the US’ major manufacturing companies, like Boeing and General Electric, and their workers could be hurt if other countries retaliated for the tariffs or if existing trade agreements were ripped up.
Boeing officials, already dismayed by Trump’s attack last week over the costs of a new Air Force One, acknowledged that the Iran jet deal still faced contingencies — a polite way of saying they were deeply worried about whether Trump and the Republican-led Congress would support it.
Beyond that deal, Boeing and other companies that export jet engines, high-tech products or heavy equipment — and supply some of the highest-paying manufacturing jobs — are also concerned that they could become easy targets if Trump started a trade war.
“You slap a 45% tariff on Chinese imports, and the Chinese suddenly acquire a fondness for Airbus jets instead of Boeing’s,” Richard L Aboulafia, an aerospace analyst, said, referring to Boeing’s European rival.
Trying to protect some jobs could put others at risk, he said. “And whether it’s trade with Iran or China, there’s an emerging pattern of the United States turning its economic back to the rest of the world, and that could be greatly damaging to the major export players like Boeing,” he added.
Boeing, based in Chicago, is the nation’s top exporter in terms of the value of the goods it sells, which include midsize and giant airliners that are increasingly shipped to China and other parts of Asia, including West Asia — areas with the fastest economic growth.
Sales of its jets have long been a part of US diplomacy, with foreign buyers having to decide whether to deal with Boeing from the United States or Airbus from Europe. President Barack Obama has said that he promotes Boeing’s planes on his travels.
Now, Boeing and other export-driven firms, while fearful of Trump’s rhetoric, are hoping to make the case that they are exactly the types of companies Trump should embrace.
Boeing, which employs about 150,000 people, makes most of its parts in the United States and exports most of its products, bringing in cash from overseas. It has also increased production at its enormous plants in Washington state and South Carolina.
But industry analysts say a 12-year boom in airliner sales seems to be peaking, and orders for larger planes are slowing. That means Boeing could use the government’s help more than ever to keep pace with Airbus, its only major competitor.
Boeing is also the nation’s second-largest military contractor, and it is counting on Trump’s promises to increase military spending to offset the slowdown in commercial orders. His criticism on Twitter of the projected cost of converting two Boeing 747-8 jets into presidential planes caught the company’s executives off guard and added to their wariness about speaking out against his policies.
Several days before Trump’s tweet, Boeing’s chief executive, Dennis A Muilenburg, had expressed concern in a speech over “apprehension about free and fair trade” and “negative rhetoric” about trade agreements by both Republicans and Democrats. The two men talked after Trump’s tweet, and Trump later called Muilenburg “a terrific guy” with whom he could negotiate.
Loren B Thompson, an analyst at the Lexington Institute, a research group funded by Boeing and other military contractors, said Trump’s tweet seemed intended “to send a clear message to all these companies that they must not try to game the system while he’s building up the military.”
But the main concerns now for Boeing and most multinational companies are what will happen with Iran and China, and whether Washington, DC, will be able to finance large export sales.
Boeing said its agreement with Iran called for 80 planes to be delivered, starting in 2018. They include 50 of a new version of its single-aisle 737 jet, 15 of its larger 777s and 15 of a new 777X that should be ready for service by 2020.
Hurdles facing Boeing
House Republicans have sought to block the sales, and Trump has said Iran would not have been able to negotiate with Boeing if it had not been for the “disastrous Iran nuclear deal,” which put limits on Iran’s nuclear programmes. But in a tweet that gives Boeing hope, he also expressed concern last January that Iran might buy its jets from Airbus instead of Boeing.
Iran said Sunday that it was close to signing a deal to buy 118 planes from Airbus as the nation seeks to play the two companies against each other.
Another big hurdle for Boeing would be how to finance its sales to Iran. Conservatives in Congress have been trying to kill the Export-Import Bank of the United States, which has long provided subsidised credit to promote US exports. Trump has said he does not think the bank is needed, but he added that he had not made a final decision.
Aboulafia, the aviation analyst, said it would be hard for Iran to get private financing because lenders could have trouble repossessing the planes if it defaulted.
Boeing and other big exporters are also concerned that Trump’s tough stance toward China could set off a trade war, costing them sales and jobs if they get caught in the crossfire.
In the recent speech, Muilenburg said one-fourth of Boeing’s new planes were now bound for Chinese customers, and a significant amount of Boeing’s future sales growth is expected to occur there.
Still, Boeing has one of the largest corporate lobbying offices in Washington, as well as other ways to reach Trump before he makes crucial decisions.
Trump has named a former Boeing chief executive, W James McNerney Jr, to a 16-member group of strategic advisers. Muilenburg, the current chief executive, grew up in Iowa, whose Republican governor, Terry Branstad, was Trump’s pick as ambassador to China.
Branstad has been friends with China’s president, Xi Jinping, since Xi visited Iowa on an agriculture mission decades ago. Analysts say Branstad could help moderate some of the trade tensions.