Tariffs in Flight

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It’s no secret that 2024 was quite a challenging year for Boeing. The aerospace giant nevertheless managed to secure major orders in the second half of the year, and doubtless it was hoping to build on this momentum in 2025. President Trump’s prominent tariff proposal seemed to dampen those hopes, with the EU and China quickly identifying Boeing as a visible and symbolic American company they could target for retaliation. Yet it could be argued that Trump’s return to the White House has benefited Boeing. 

It begins with Trump’s March 21 decision to award Boeing a contract to make the next generation of fighter jets, to be dubbed the F-47. “We can’t tell you the price,” Trump told reporters when announcing the contract, but experts estimate the contract to be worth $20 billion. 

Trump has not always been a fan of Boeing, of course. He was vocally annoyed that the new Air Force One, which was ordered during his first term, has been run up against multiple delays, setbacks, and massive budget overruns. However, last week, Boeing proposed a 2027 delivery date (in time for him to use before leaving office), subject to the Air Force agreeing to relax capabilities requirements.

This might have mollified Trump enough to stump for Boeing abroad. While not explicitly tied to the U.S.- UK trade deal, Commerce Secretary Howard Lutnick hailed a $12.7 billion order for 30 Boeing 787s by British Airways’ parent company IAG last week. 

That turned out to be just an appetizer. Bloomberg News reported that ahead of his visit to the Middle East this week, “the White House has made clear it would like similar commitments from Qatar [as made] during Trump’s first visit to the gulf state as president,” and in apparent response, Qatar Airways announced an order for 100 (or more) Boeing widebody jets. (It has also been reported that Qatar might give Trump a used 747 to use as an interim Air Force One until Boeing delivers the latest presidential airliner, though there are legal and ethical concerns to resolve first.) In related news, Saudi startup airline Riyadh Air was reported to be considering a Boeing order as well.

Even Trump’s tariff campaign could ultimately have net benefits for Boeing in the long term, as a trade war with China might disrupt the rise of China’s state-run COMAC (Commercial Aircraft Corporation of China), a competitor with ambitions of challenging the global Boeing-Airbus duopoly. COMAC already has a rival to Boeing’s 737 (the C919 single-aisle, narrow-body airliner) and is working to design a wide-body transoceanic aircraft to compete with Boeing’s flagship 777. 

But as it turns out, the C919, despite being entirely “made in China,” includes components made by U.S. companies like Honeywell, GE, Arconic, and CFM International (a joint venture between GE and France’s Safran). With no Chinese alternatives readily available, that means the U.S. could “[halt] Comac in its tracks anytime it wants,” Richard Aboulafia, managing director of AeroDynamic Advisory, told the Financial Times. If somehow the U.S.-China trade dispute is not quickly resolved (though the news out of Switzerland over the weekend suggests it very well might be), halting sales of C919 components “may be the next stage,” according to Sash Tusa, a UK-based aerospace and defense analyst.

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📧✍️Here’s what a reader commented📧✍️

Question: Should (or can) creative products like music and movies be encouraged through trade policy?

Answer: Art should never be influenced by trade policy. Congress knew this which is why there is a specific cutout in the tariff abilities of a president which prevents Trump from placing tariffs on movies/tv shows etc. Not to mention legal challenges over First Amendment violations such proposals would attract, which is probably why the White House walked it back already. The correct way to encourage more film/tv production in the United States is a Federal Tax Subsidy which is greater than the subsidies they are currently getting to shoot in places like Romania. Make it cheaper to shoot in America and they will, otherwise they will keep shooting where they can get more production value out of their dollar.

Catch up with FS Insight

There were several positive developments over the weekend from the White House (China-USA deal and a coming Executive Order cutting drug prices 30% to 80%). These add to a series of incremental macro positives over the past few weeks, which have supported the improving positive risk/reward in stocks.

Technical

At present, the pattern in SPX remains constructive and should allow for a push up to 5750-5800.

Crypto

While there is no need to “panic chase,” ETH likely begins trading better from here, and in our view, we should start considering ETH beta names.

News We’re Following

Breaking News

• U.S., China agree to large tariff cuts, Dow futures rally WSJ 

Markets and economy

• Berkshire Hathaway now owns 5% of entire Treasury-bill market as Buffett patiently waits for his elephant CNBC 
• Trump plan would tie some drug prices to what peer nations pay NYT  
• World’s largest EV battery maker CATL to raise at least $4 billion FT 

Business

• Zepbound beats Wegovy for weight loss in first head-to-head trial of blockbuster drugs  AP
• OpenAI negotiates with Microsoft to unlock new funding and future IPO FT 
• Google’s search dominance might not be in as much danger as Apple would have you believe YF 

Politics

• Flights could be disrupted across U.S., Transportation Secretary warns NYT 
• Ras Baraka arrest: Trump administration eyes charging three more NJ Democrats in ICE fracas CNBC 

Overseas

• Hormone-treated beef will not enter UK after US deal, says UK government BBC 
• Zelensky challenges Putin’s offer to meet after Russia ignores ceasefire demand CNN 

Of Interest 

• Taliban suspends chess over gambling concerns BBC 
• Online bettors spent over $40 million gambling on identity of next pope CNBC