Boeing (NYSE: BA) stock continued its recent turbulent ride with a decline Thursday morning: As of 12:30 p.m., it was off by 6.4% as the broader stock market reassessed the case for optimism after Wednesday's tariff-pause rebound.
Boeing and tariffs
Wednesday's news needs to be put into context. President Donald Trump put a 90-day pause on most of his new tariffs, but left his new base 10% tariffs on nearly all imports in effect. However, he also left the tariffs on Chinese imports active and boosted them up to 145%. Trump's move to pause the larger share of his tariffs on most trading partners could reflect his underlying willingness to make conciliatory deals that improve U.S. companies' positions in foreign markets.
That said, it's far too early to conclude that such deals will be done, and a 10% tariff is still a 10% tariff.
Tariffs could hit Boeing in several ways:
- Tariffs are likely to increase Boeing's costs, notably on raw materials like steel and aluminum, and also the costs for its suppliers, which will pass those higher expenses on to Boeing as much as possible.
- Reciprocal tariffs by other nations, such as those being imposed by China on the U.S., will further raise the costs for foreign companies to buy Boeing's planes, making them less competitive compared to Airbus' planes.
- Supply chains could be negatively impacted. For example, Boeing supplier Howmet Aerospace has already declared the tariffs a force majeure event -- legally, an extraordinary event outside of its control that prevents it from fulfilling its agreements, and allows it to breach those contracts without being subject to liability.
- Orders for Boeing planes could become political footballs in any tariff negotiations, a situation that could lead to order delays and cancellations.
- A global economic slowdown could result in order cancellations as airlines pause their capacity expansion plans.
Investor sentiment about tariffs will undoubtedly move Boeing's stock price. In addition, it's far from clear at this stage how much friction and cost will be added to the supply chain as this transition into a high-tariff regime proceeds -- assuming it does. Expect more volatility ahead.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Howmet Aerospace. The Motley Fool has a disclosure policy.
