China halts Boeing deliveries as trade war with U.S. escalates

Boeing (NYSE:BA) shares dropped about 2.5% in pre-market Tuesday trade on report China ordered its airlines to stop taking deliveries of the company’s jets.

This decision is likely a direct consequence of the escalating trade tensions between the United States and China, with U.S. President Donald Trump imposing tariffs of up to 145% on Chinese goods. Bloomberg News reported on the jet deliveries halt.

Accordingly, China is expected to account for 20% of global aircraft demand over the next 20 years, and in 2018, nearly a quarter of Boeing’s deliveries went to the country. However, trade tensions and internal challenges have kept the U.S. planemaker from securing major new orders in China in recent years.

China’s move to halt purchases of aircraft and related equipment from U.S. companies comes after Beijing announced retaliatory tariffs of 125% on American goods over the weekend.

These tariffs would effectively more than double the cost of U.S.-made aircraft and parts, making it impractical for Chinese airlines to continue accepting Boeing planes.

Moreover, the Chinese government is exploring ways to aid airlines that lease Boeing jets and are now facing increased costs due to the trade dispute.

The situation remains volatile, with the potential for rapid changes, as evidenced by President Trump’s previous reversals on tariffs, such as those on Apple (NASDAQ:AAPL)’s iPhones.