Canada Retaliates Against The US & Boeing, Cancels Fighter Jet Order

In October we learned of a major trade dispute between the US and Canada, or perhaps more specifically, between Boeing and Bombardier.  Boeing had filed a complaint with the US Commerce Department, asserting that Bombardier was getting illegal subsidies from the Canadian government and dumping its product (specifically, the CSeries aircraft) into the US market. Delta has 75 of these aircraft on order, and clearly Boeing wasn’t happy about that, even though they don’t have a direct competitor for the plane.

The Trump administration sided with Boeing, and proposed a significant tariff on the plane, of up to 300%. Not surprisingly, Delta’s CEO said that his airline still planned to take delivery of the CSeries aircraft, and that they didn’t plan on paying the tariffs. What that will look like in practice remains to be seen, though (the latest rumor is that Aeromexico may be taking delivery of some of Delta’s CSeries aircraft in the short term).

I guess this shouldn’t come as much of a surprise, but it looks like Canada may be retaliating against the US when it comes to this trade dispute. Specifically, Boeing has lost an order from Canada for 18 Super Hornet fighter jets, which were supposed to go to the Royal Canadian Air Force. This deal was estimated to be worth up to 6.4 billion USD. Instead they plan to buy 28-30 used fighter jets from the Australian military.

Per the International Business Times:

The Canadian government announced in 2016 it would purchase 18 planes from Boeing. The new F/A-18 fighter jets would have been a temporary measure for Canada, to allow the country to meet its commitments to the North Atlantic Treaty Organization (NATO) and the North American Aerospace Defense Command (NORAD). RCAF currently operates an ageing fleet of CF-18 fighters, which is due for replacement sometime in the next decade.

Since the Australian fighter jets are almost as old as the current Canadian fleet, RCAF will reportedly need to buy some additional planes to use them for spare parts. That could explain why 28-30 of the older planes would be bought instead of 18 new ones. An official announcement is expected in the coming days.

That’s only fair enough, I suppose. I’ll be curious to see how this situation further develops.

Comments

  1. Imagine that. Protectionist trade policies end up drawing a retaliatory action from another country, causing an American business to lose an order.

    Cue Captain Renault in Casablanca: “I am shocked. Shocked to find that gambling is going on in here”

  2. Wow. Trump wants to get his way with everything he even feels the need to piss off a country that it’s had hundreds of years of friendly relations with. He is so unhinged I can see him announcing a wall along the world’s largest undefended border soon.

  3. And Canada has suspended it’s order of 67, F-35 (replacement for F/A-18) fighters as a result of a campaign promise by Trudeau (probably unrelated to the current trade war dust up). One has to wonder if that business will go to the joint French-German next generation fighter.

  4. Boeing, like all big players, have always been nasty MoFos. They bound major US Airlines in secret and illegal 20-years exclusivity deals in the 90s that kept airbus out of the majors. Fcuk Boeing, they deserve all the opprobrium heaped upon them

  5. The reported purchase price per plane to Delta was less than twenty-four million dollars according to Reuters, the news agency. Another source said it was only nineteen and a half million! Were you to buy a new Gulfstream 450, their cheapest corporate jet, it would be thirty-nine million. Bombardier’s miserable little commercial plane the, CRJ700, lists for over forty-one million. Something’s rotten in the state of Denmark….er, Canada.

  6. If Canada is fine with old planes go ahead get old planes. Boeing had to calculate and I’m sure calculated for this. Boeing planes will go to someone else. It’s not a tax on Canadian manufactured plane. It is a tax on Canadian manufactured plane designed and built by mostly Canadian government money.

  7. @Endre “Boeing planes will go to someone else.”

    Yes, that’s exactly how it works… Boeing already has another $6.8B buyer lined up who wouldn’t have bought jets but for Canada’s cancellation. Right…

  8. @Endre: To insinuate that Boeing doesn’t also benefit from US tax dollars in the same way you’re positing Bombardier does is fallacious and demonstrates a lack of understanding of how intertwined the public and private sectors are when it comes to the military industrial complex. Is this tit-for-tat? Totally. But all’s fair in love and capitalism.

  9. They aren’t hurting Boeing, stock is up today in a slightly down market. Currently up just under $3 per share.

  10. I support US Govt. position 100%! Including implementing punitive tariffs.
    Bombardier was ‘dumping’ these planes into US market way below their cost of production.
    So happy our govt has the spine to ‘call the Canadians out’ & block the sale.
    I realize ALL of the large aircraft producers receive some type of illegal aid, illegal tax breaks (Boeing & Airbus included)…
    However, the price paid by Delta for these aircraft was so egregious, the US Govt. had to do something, otherwise every trade partner in the world will keep trying to take advantage of US ‘pushover’ trade policy. The CSeries is an amazing, excellent aircraft – however if you cant sell the plane for what it actually cost to manufacture (let alone make a profit), then it essentially becomes a taxpayer subsidized ‘jobs program’ for Canada & UK (N. Ireland). That is not ‘fair trade’.
    Regarding the cancelled sale of a very small batch of F18s…do you think Boeing really cares..? Canada’s fighter choices are now very limited – buy the F35 or buy a 4th gen European fighter. They would have bought a Europe fighter already, but they are smart enough to know that the technology is not as modern as the F35, headaches support & logistics problems that accompany purchasing jets from Europe, etc…

  11. The headline here says that Canada is retaliating with this cancellation. Where is the evidence that this cancellation was done specifically for retaliation? I don’t even see that in the referenced article. I only see media SPECULATION, present article inclusive. If this is speculation then the title needs to be corrected.

  12. @dmodemd, this cancellation was actually announced less than a week after the US trade ruling. I am not sure why this only came up here and in other media now, but it actually at least appeared to be in direct retaliation for the trade ruling. By all appearances, this was being prepared in anticipation of an adverse ruling, just as the deal with Airbus was being prepared for the same event.
    The US government should recognize that similar contingency planning continues to go on regarding the NAFTA. The world does not stop and start at the behest of the US. Everyone else continues to make plans based increasingly on the assumption that the US will continue to isolate itself and that any agreements with the US cannot be relied upon.

  13. @farnorthtrader, your comment above has ‘some’ merit, but not as much as you might think.
    Mexico & Canada want to play ‘hard ball’ with the US on NAFTA…but they need to appreciate that the US is the largest ‘consumer’ nation in the world, definitely not a market you want to lose or ignore (no matter what industry, whether it be aerospace or timber/ wood products).
    The current US administration is keenly aware of this, and using that ‘carrot’ as leverage in redefining trade agreements. This is precisely why Canada is so upset about the Cseries tariffs, virtually 50% of the Cseries market ‘wiped out’ with implementation of the tariffs. No getting around that.
    If Canada & Mexico refuse to budge on NAFTA concessions, current US admin will blow it up, and USA, Canada & Mexico all lose. But Canada & Mexico will suffer much, much more.
    Americans love inexpensive avocados from Mexico, but will not go hungry if Mexico tries to sell elsewhere…
    Same goes for cheap timber from Canada, where else will that Canadian timber be sold? China? Europe? shipping costs & logistics kill that back-up plan.

  14. Canada even has/needs fighter jets? 🙂

    Cute, but I thought it was just understood the U.S. protects them since they apologized for Bryan Adams.

  15. Way to go and kudos to Canada. US always think everyone will be scared of them. They created many rules only if they are benefited from it and will keep it. Look at free trade, what is true meaning of free trade, do any trade as you wish without restrictions but since US can not complete with Mexico because of their cheap labour, they are upset and wanted to pull out. same thing Trump went to trash Europe and saying European aren’t buying enough US made cars, give me a break, who wants to buy the crappy American made cars. period.

  16. @Endre: Oh Yes. everyone wants to buy American made goods. American is the best, your typical American attitude. What a joke!

  17. Who knew trade was a two-way street? And who knew that protectionist trade practices would have consequences. If only..

  18. Why does Canada have a air force? Just act like Korea or Japan and let the citizens of the USA to pay for the security.

  19. @anon – as the jets were built in the US and contain restricted-distribution electronics, the US government has to sign off on the transfer. Normally, this wouldn’t be an issue, since Canada has the same level of defence cooperation as Australia, if not higher.

    But under the Trumpistas, nothing is “normal” any more.

    I don’t understand why Canada would replace old jets with old jets, instead of buying new Eurofighter Typhoons or Dasault Rafales. Unless Justin is really trying to squeeze the defence budget.

  20. So Areomexico will “buy them” sans heavy tariff and then sell them to Delta from Mexico for a small fee. Right?

  21. It was easy for the US to bring a trade complaint against Canada and so it did to make sure all other trading parties saw how determined it was to control international trade worldwide! It has been too easy for Canada to place all of its trade eggs into one basket with US written on it. When the going gets tough the tough get going. The Canadian government and private sector must now put all of their efforts into trade agreement with other major international trading blocs. Time to stop relying on good relations with the US. They are only as good as the mood of the President on any given day. The sooner that is understood, the better!

  22. For my namesakes Neil education Australian F /A 18 ,S actually have had little use and are normally kept hanging around in Australia in the hot and very dry environment of the Northern Territory , except for a few that have been assisting in action in Syria and Iraq and they are kept in very good condition . Little if anything has been written about a possible sale to Canada, their replacement the F35 is yet to arrive with the first couple for Australia going through testing in Nevada to iron out problems which are very extensive as has been well reported. If Canada does not go ahead with its F35 order it could look to China and its J20 based on F22 designs or J31 based on the F35 designs, both of which are up and flying , in either case you can be sure they would cost less than a quarter of the cost of a F35. I am also sure China would pick up the 75 C Series Bombadier that Delta may cancel and integrate them in their own domestic air network. For those in Canada do not despair !!! Australia will come to your aid.

  23. If anyone ever wanted an example of the Dunning-Kruger effect, I’d probably point them to this comment thread.

  24. @joeboo, I certainly get that the uS consumer market is the largest in the world and Canada, in particular, is very reliant on the trade relationship with the US as a consumer of raw materials, however, timber is a good example of the reverse of that relationship. The US needs more lumber than it can produce and, as you noted, logistics dictate that Canada is, by far, the best place to get it from. Oil is another example, in the long term, of this dependence on a secure supply of raw material. Potash is another. Possibly more important if the trade relationship became truly broken, would be water. Canada has the very real potential to turn off the taps on a large part of the US water supply. While it is uncomfortable to not be able to sell what you produce, you can always keep it and wait until the other party comes around, but if you need lumber, oil or water, it becomes extraordinarily uncomfortable to go without, particularly uncomfortable for the politicians who artificially create the shortage.
    Particularly for NAFTA, the US has everyone focused on the pain for suppliers, but the real pain will be for consumers who will either have to go without or will face higher prices to keep what they have. And higher prices mean inflation which means higher interest rates, larger fiscal deficits from higher interest rates on government debt and slower growth. The real pain from restricting trade is in the consumer nation which is, in this case, the US.

  25. @Steven L, I would note that studies have shown that US people are particularly prone to the Dunning-Kruger effect. I particularly enjoyed the study in the field of mathematics last year. The only area where US students finished first was in their confidence about how well they had done. In actual performance, they finished in the bottom quartile in virtually every area, but when asked how they thought they had done, they finished first!

  26. We can argue the merits of canadian trade, but why are some of you making fun id the Candian airforce? Candaian deaths in ww2 was the same as the US as a percentage of each country’s population. They were the largest contingent after US and British during the d-day. Lets give respect where its due. And no, I am not Canadian.

  27. To all the folks making fun of the Canadian military, last time the US picked a fight with Canada they took Washington DC and burnt the White House down. Maybe time for a refresher?

  28. @JoeBoo
    Trying to understand your “logic” here: Delta negotiates hard to get a killer deal on a plane, so they can offer low fares to Americans on short-haul flights and remain a profitable business, providing jobs to thousands of Americans.
    Now, because of the ludicrous tariffs, Delta can either wait till the planes are assembled by Airbus in the good ol’ US of A (and fly old, expensive planes instead till then) or buy Embraer jets built in Brasil, Sukhoi jets built in Russia or COMAC jets built in China instead – because BOEING doesn’t build any comparable planes!
    Now, how exactly do US citizens benefit from this? Please do explain!
    (face palm)

  29. Boeing accounted for this? Really? What company accounts for losing a $6.4 Billion contract? Lol …. this is another example of Trump not seeing past his nose regarding protectionism. Trump said getting rid of NAFTA would be better for the USA? ….really? $6.4 Billion dollars in sales lost means Years of lost jobs people … this is not $64 we’re talki g about here lol …. educate yourself people on economics.

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