The U.S. is still recovering from one of the biggest political upsets in U.S. history. Most investors expected a complete meltdown in the aftermath as markets tumbled after Trump's victory became evident. However, this wasn't the case at all. Stocks actually rallied upwards after the win, driven by bright prospects for the financial and biotech industry. In this article, we discuss a few situations that may arise for Boeing ( BA ) under President Trump.
- Trump has indicated that he is opposed to the Trans Pacific Partnership. This is an agreement that is focused on removing tariffs, thereby making markets more accessible for participating countries. Most assume his coming to power means the death of the TPP . This could pose some problems considering that the company expects demand for 39,620 commercial aircraft in the coming 20 years, with much of it coming from the Asia Pacific region.
- Boeing is bound to be affected in its Chinese operations. The company had recently announced its intentions to create a 737 completion center in China, which could indeed result in US job losses as aircrafy complpetion moves offshore. This plan could come under immediate scrutiny by the President-elect. Additionally, Trump's harsh rhetoric aimed at China could hamper future orders, as Chinese orders represent about 20% of the company's total backlog and consequently a huge chunk of the revenues. In an attempt to get better deals for the U.S., Trump may take actions thta initiate a trade war , most notably with China. The President can directly influence trade agreements and can also impact trade with his foreign policy. If such a situation were to arise, Boeing's future orders could definitely feel the pinch as exports to the Asian superpower could be hampered greatly.
- As mentioned previously, the President has a big role to play in the world economy. In an attempt to strengthen the domestic economy, Trump could set off a chain reaction in other countries, which could have a detrimental effect on the demand for air travel and consequently, aircraft demand.
- The most immediate and imminent threat for Boeing could be Trump's fierce opposition to the recent Iran Nuclear Deal . In his campaigns, the President-elect had publicly ridiculed the deal and had called for a complete renegotiation, were he to win the election. Yet negotiations between Boeing and Iranaina carriers are underway regard large overdue aircraft orders. That said, it is expected that Boeing will try to finalise the deal before Trump takes office in January. If things don't go as planned, the company is bound to lose out on a sure-shot deal worth $25 billion, at a time when aircraft orders are in a major slump.
- In the defense space, despite a potential increase in the DoD budget in the coming years, as Trump decides to increase military spending, it doesn't seem as though Boeing will see many benefits. This is mostly because Lockheed Martin's F-35 has been selected as the country's fighter for the future. That said, Trump's rhetoric could lead to other countries around the world, including NATO members to increase their defense budgets. This could be beneficial to Boeing, but the true impact on the company is largely unknown.
However, it seems as though the market has perceived Trump's arrival as beneficial to the company with the stock climbing by almost 4% since the election results were announced on the back of strong quarter results. It is yet to be seen how aggressive President Trump will be. All one can do at the moment is speculate and hope for the best.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.