Recently, China sent back a new Boeing airplane, the price of which raised due to tariffs. This case further strengthens the position of tariffs established by trade and the larger economic scenario.
One of the world's largest manufacturers of commercial jetliners, Boeing manufactured aircraft for China. However, in the scope of the US-China trade war, tariffs were applied to those jets. The tariffs raised the overall costs for the aircraft significantly, thus eliminating the economic viability for China.
Here, it is significant to note that what a tariff is; a tariff is a type of tax that one country levies on importation from another country. It is meant to defend local industries and make the prices of foreign ones expensive. The differences between the US and China led to all types of tariffs that choke trade between these two countries.
When China returned this new Boeing jet, it raised many questions. Is it Boeing's issue alone, or will there be greater repercussions? Possibly the withdrawal of this jet indicates a dip in demand for Boeing aircraft manufactured in China and maybe a waning position in the Chinese market.
This incident can also have a broad cultural impact on US-China trade relations. When the United States imposed tariffs, the aim was to promote the domestic industry, but it now appears that the alternative impact may be on how internationally competitive US companies would be.
This is a trying period for Boeing. The worldwide airline industry has witnessed enormous losses because of COVID-19, and under such a circumstance, maintaining fresh sales and business becomes difficult for the airline. Reduction of its presence in markets as large as China can have a long-lasting impact on its financial environment.
The rise of domestic aircraft manufacturers in China also brings a new challenge for Boeing, with the establishment of its own commercial jet by the Chinese company COMAC (China Owner Aircraft Corporation) that challenges big players like Boeing and Airbus. Boeing will need to come up with new strategies to hold onto its market share as a result of such rivalry.
At the same time, it is a very crucial moment for China as well. The government of this country is trying to boost its domestic industry, and one of the means of achieving that may well include putting limits on the import of products from other countries. Thus, it goes a long way in explaining why China sent back Boeing's jets.
In the most concise terms, it is an important signal that sending back Boeing jets would send, both for China and for the global trading system. The kinds of complications that tariffs create in the relations between companies and countries will determine in important ways how much trade is structured in the future.