Bombardier, Trump, Tariffs and a Call for Free Trade
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Earlier this week the United States hit the Canadian aircraft manufacturer, Bombardier, with a 220% tariff on one of the jet liners it sells in the US…. Yes 220%! This action, taken by the Trump administration, is in response to a request from Boeing about unfair subsides by the Canadian government to Bombardier. Upon investigation the US determined that the Canadian government had subsidized the company for the building of a certain jet liner, the “C” series. After Boeing protesting to the US government a decision was made to slap the tariff on the product. If these allegations are true the tactic that was taken by Bombardier and the Canadian government is called dumping. That is where a government will give incentives to a firm to allow them to sell them in a foreign market at an advantage that they otherwise wouldn’t have. In this case, if the allegations are true, a subsidized product allowing them to sell them for far less in foreign markets. When this all began Boeing was claiming that this was a violation of the NAFTA (North American Free Trade Agreement) and now that the tariff has been placed Bombardier are now claiming the same.
What we really need here is free trade, not an agreement that uses the phrase but clearly doesn’t want to have it. Free trade benefits the consumer the most when we also have a free market. It allows the best products to be sold for the lowest prices. The competition pushes other firms to step up their game and innovate more or go by the wayside. Even if the Canadian government was subsidizing Bombardier it is not the US government’s job to try and ‘level the playing field’. All this leveling of the playing field is bad for business and consumers. The competition is lowered thus hurting the availability in the market for more products to be available to the public. Also the innovation that one firm would have needed to make to keep up is no longer required. So now the consumer is left with a higher priced good that isn’t as…. well good as it could or should be.
Finally, in this special case with the Bombardier tariff we have already seen blow back. The wings for the planes that are now slapped with the tariff are produced in the UK. In retaliation the UK is now saying they may back out of deals with Boeing in an effort to demonstrate their resolve. The UK defense ministry might now seek out other aerospace companies to fill the contracts that had already been awarded to Boeing. It is time we get what we want, true free trade.
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Keep that coffee warm for us.
LWS
