President Donald Trump used a visit to a Boeing Co. aircraft factory in St. Louis to tout the Republican tax overhaul and urge the company to give the government a “good price” for its fighter jets, lest he take his business elsewhere.
“Otherwise, we’re going to buy them from somebody else” in the U.S., Trump told Boeing Chief Executive Officer Dennis Muilenburg during a roundtable event on Wednesday.
The company reported a $1.05 billion boost to its fourth-quarter profits alone from the new tax law. The Chicago-based planemaker expects to be taxed at about a 16 percent rate going forward, lowering its tax bill just as its marquee 787 Dreamliner generates significant cash profit after a decade of losses.
Still, Boeing, the largest U.S. industrial company and exporter, faces risks as Trump pursues a tougher trade policy that leaves the planemaker open to retaliation.
Benefits and Risks
Brazil, one of the countries most affected by Trump’s 25 percent tariff on imports of steel, may take aim at a potential commercial tie-up between Boeing and Embraer SA as part of retaliatory measures under consideration, Bloomberg reported Tuesday. Boeing jetliner deliveries to China, the manufacturer’s largest overseas market, might be delayed if trade relations deteriorate, analysts said.
But as the second-largest U.S. defense contractor, Boeing is also poised to benefit from the higher defense spending that Trump has promised. The company is in a dogfight with Lockheed Martin Corp. for the $20 billion T-X trainer contract for aircraft to hone fighter pilot skills in the 2020s and beyond. Boeing’s version, unveiled in St. Louis in 2016, would help its military aircraft division live on after two aging fighter models eventually retire.
Trump has also become a vocal advocate of Boeing’s fighter jets, promoting their abilities to visiting heads of state. The president’s fiscal 2019 budget plan calls for adding 24 Boeing Co. F/A-18E/F Super Hornet jets in fiscal 2019, and 110 jets through 2023. The Obama administration had proposed ending purchases of the plane this year.
“The F-18, my favorite plane, is a work of art,” Trump told an audience of Boeing workers Wednesday. “We just looked at different versions of it, and it is spectacular.”
Trump had hinted at a “seriously big order” of the Boeing fighter, manufactured in St. Louis, while visiting another of the company’s factories in North Charleston, South Carolina, last year. The fiscal 2019 request for the Super Hornets will be the largest since fiscal 2012, when the Navy asked for funds to buy 28 of the fighters.
The Navy has argued that it needs more of the planes to fill a shortage in its inventory because of delays to Lockheed Martin Corp.’s more advanced F-35 Lightning II fighters. Before Trump even took office, he’d promoted the Boeing Super Hornet as a less costly alternative to the F-35, though the two planes have different capabilities.
As president-elect in 2016, Trump upended years of Pentagon procurement practices with a tweet announcing he’d asked Boeing to price an upgraded Super Hornet as a potential replacement for what he called “the tremendous cost and cost overruns of the Lockheed Martin F-35.”
While Defense Secretary Jim Mattis ordered a review pitting the F-35C against “an advanced Super Hornet,” no results were ever announced. Trump later switched to praise of the F-35, taking credit for cost reductions in a contract that was already under negotiation when he took office.
