The current trade spat between China and the United States will likely affect American tourism industry stakeholders, it just simply isn’t clear to what extent. The first sector to be affected will likely be aircraft, with China announcing new tariffs on American-made planes. The proposed, 25 percent tariff will affect American aircraft that weigh between 15,000 kg (33,069 pounds) to 45,000 kg (99,208 pounds). However, there is some debate on whether or not this strategy is a prudent move on the China side.
While the move will undoubtedly hurt Boeing sales in the long-term, demand for aircraft is relatively inelastic and it is hard, if not impossible, to shift supply at a moment’s notice. Chinese airlines may be forced simply continue buying Boeing aircraft, tariffs notwithstanding. This is due in part because shifting over current routes and/or planned routes to similar Airbus models may prove too difficult in the short-term. Airbus also does not likely have enough unreserved aircraft to sell to China’s ever-expanding airlines and China’s own domestic production is nowhere near ready to handle domestic demand.
Placing tariffs on American aircraft will likely prove devastating for both Chinese airlines and American manufacturers alike
In short, implementing tariffs on American aircraft, will not only harm American manufacturers but will also likely hamstring the expansion of Chinese airlines.
It seems that the Chinese government is aware of some of these issues, and the wording of the proposed tariffs implies that many Boeing aircraft will be exempt due to a “loophole.” Most notably, Boeing’s popular aircraft, the 737 Max 8, would not be subject to the tariffs due to its weight specifications.
While at least one popular Boeing model appears exempt from the tariff, it isn’t clear how the weight specifications are understood on the Chinese side
However, the aircraft is only 70 kg over the upper limit. This has led to some speculation that the Max 8 would, in fact, be subject to the tariff because, as noted by CEO of IBA Group Phil Seymour quoted by AIN, “…China’s proposed tariff does not specify whether the upper empty-weight limit refers to the manufacturer’s specified empty weight of the aircraft or the aircraft’s actual empty weight in the operator’s seat configuration.”
Moreover, given that these tariffs are only proposed and not finalized, state authorities may move to adjust accordingly for maximum impact.
In truth, such vagueness is not out of character for Chinese regulations, which are often worded in ways that allow for a nuanced and flexible interpretation that allow for case-specific implementation.
Max 8 has proven popular among Chinese airlines looking to upgrade their fleets. However, other members of the 737 family, particularly older models, will be subject to the 25 percent tariff if it goes into effect.