It appears the Commerce Department's preliminary ruling, issued late last night, to slap a 220% tariff on Canadian aircraft manufacturer Bombardier could trigger an all-out trade war between the UK and Canada (on one side) and the US (on the other) as public officials in the UK and Canada blasted the ruling and threatened retaliation should the sanctions, which still need to be approved by the US International Trade Commission, become permanent.
Earlier today, the Commerce Department ruled that Bombardier's jets should face the levy because the company received anticompetitive government subsidies. The ruling comes after Boeing said the Bombardier C-Series jet would not exist without hundreds of millions of dollars in launch funding from the governments of Canada and Britain, or a $2.5 billion equity infusion from the province of Quebec and its largest pension fund in 2015. Boeing brought the complaint after Delta Air Lines agreed in April 2016 to purchase 75 C-Series jets, an order worth some $5 billion.
The preliminary ruling - which comes as the US, Canada and Mexico are holding their fourth meeting to renegotiate Nafta - has met with praise from Boeing, and criticism from virtually everybody else involved.
The UK, which does a brisk business with Boeing, is threatening to cut ties with the company if the decision against Bombardier is finalized. The reason? Bombardier has a large plant in Belfast, employing some 4,200 people in Northern Ireland, a region that the UK's ruling conservative party relies on heavily for support. If Bombardier, which is already struggling, takes another hit, those people could lose their jobs, potentially threatening the conservatives' tenuous grip on power after losing their majority in snap elections over the summer, according to Reuters.
UK Defense Minister Michael Fallon said in a TV interview today that the ruling could jeapordize Boeing's business relationship with the UK government.
“This is not the behavior we expect from Boeing and it could indeed jeopardize our future relationship with them,” British Defence Secretary Michael Fallon told reporters in Belfast at a briefing in the historic Harland & Wolff shipyard, a few hundred yards from the Bombardier plant.
“Boeing has significant defense contracts with us and still expects to win further contracts. Boeing wants and we want a long term partnership but that has to be two way.”
“Boeing is an important investor in the United Kingdom and an important employer in the United Kingdom but we would prefer this kind of issue to be settled on a negotiated basis,” Fallon said.
“This is not the kind of behavior that we expect from a long-term partner and I’ve made that very clear to Boeing,” Fallon told reporters.
Britain recently ordered the Boeing P-8 maritime surveillance plane and a new fleet of Apache attack helicopters. Its armed forces have deployed Chinook helicopters, the C-17 transport plane and the E-3 Sentry airborne early warning and command post.
Meanwhile, British Business Secretary Greg Clark said on Wednesday he was confident he would be able to have the U.S. anti-subsidy complaint against Bombardier dismissed.
“We’ve been working very closely with the Canadian government to make it clear that this is a complaint that is unjustified,” Clark told Sky TV.
“What needs to happen now by the trade commission is that they look to see whether there has been any detriment to Boeing,” he added.
“There hasn’t been because this aircraft does not compete with Boeing so we’re confident that we will be able to demonstrate that and have this case dismissed.”
Threatening language aside, the Gaurdian points out that Boeing has substantial leverage should the UK act to curtail its business relationship with the defense contractor. Boeing employs or supports more than 10,000 jobs in the UK; any tit-for-tat retaliation could affect them.
Even the labor party, which isn't politically dependent on Northern Ireland and thus has less of an incentive to care about the potential closure of a Bombardier plant there, has joined in the Boeing bashing. Labour leader Jeremy Corbyn has just told his party conference in Brighton that the tariffs imposed on Bombardier planes threaten “thousands of jobs”. He called on Prime Minister Theresa May to leverage her "special relationship" with the US to try and protect workers in Northern Ireland.
"Thousands of jobs are now at stake...a Prime minister is betting our economic future on a deregulated trade deal with the US might want to take a moment to explain how 220% tarifsf are going to boost our exports from this country."
Of course, once the ITC issues its ruling, the Trump administration will have the final say on tariffs. Will May's relationship with the president be enough to save Bombardier? Or will Trump side with Boeing and spin the tariffs as a bid to protect US workers - throwing red meat to his base in the process?
What do you think?