Readers of The Armchair Trader are probably aware that Bombardier [TSX:BBD] had run into problems over a protest lodged by Boeing that Bombardier jets are being unfairly priced in the United States market due to effective subsidies received from both the UK and Canadian governments. This has gone a step further at the weekend, with rumours that the Canadian government will cancel an order for Boeing-made Super Hornet jet fighters.
Boeing shares – Canadian government likely to end Xmas cheer
According to sources close to Reuters news agency, the Canadian government is planning to opt instead for a fleet of second hand Australian F18s. This would be a major blow for Boeing, as military aircraft are a key part of its portfolio and Canada is a major client and NATO ally of the US.
Canada contacted the Australians in September, according to sources within the Australian Defence Department, with a view to acquiring second hand aircraft. This was just weeks after the US Congress voted to apply tariffs on the Bombardier sales. It is a slap in the face to Boeing and indirectly for the Trump administration.
Boeing told The Wall Street Journal at the end of last week that it still had enough orders for the F/A 18 Hornet to take production through to 2020. However, credit is wearing thin for the US among its key allies. Boeing will be looking to the Asian market for new orders after that, where worries about China and North Korea mean defence budgets are being hiked.
The arguments can also be seen in the light of ongoing disputes between Canada and the US over the future of NAFTA. The current Trump administration has been arguing that NAFTA does not go far enough to protect US jobs. Boeing alone employs over 17,000 people in Canada.
Boeing shares were on a good run
Boeing shares were trading at around 286 in after hours trading in the US on Friday. Boeing stock has been on a good run since the middle of last month when the shares broke out of the 250-266 range, where Boeing shares had been sitting since mid-September. The news will be bad for Boeing and we will likely see more selling this week which will disrupt this trend.
Like Boeing, Bombardier, which is listed on the Toronto Stock Exchange, has been relatively range bound recently. Bombardier shares took a slight dip in September when the company’s sales in the US produced the anti-dumping action Boeing had asked for.
