Boeing Co. (BA) - Get Report shares traded lower Friday after China's state-backed English language newspaper said Beijing could cancel its entire backlog of plan orders if trade tensions between the world's two largest economies escalate.
The warning followed a move by the U.S. Commerce Department to restrict access to China-backed Huawei technologies to domestic tech markets as the White House continues to escalate its criticism of China's handling of the coronavirus outbreak and encourages companies to re-locate their supply chains back to the United States.
"To retaliate against the US' Huawei trade ban, China could potentially scrap all its current Boeing orders, even if that means some Chinese firms have to pay for the liquidated damages, an aviation industry insider told GT," the paper said from its verified Twitter account.
Boeing shares were marked 2.5% lower in early trading Friday to change hands at $119.44 each. a move that would extend its year-to-date decline to around 64%.
The Commerce Department issued a final 90-day extension that allows Huawei to do business with American firms, but added it will be barred from acquiring semiconductors made with U.S. software under the Foreign Direct Product Rule
The editor of China's influential English-language Global Times newspaper said the decision could lead to retaliation from Beijing.
Former Boeing CEO Dennis Muilenberg said last year that "the lack of orders from China in the past couple of years has put pressure on the production rates" and noted that "the U.S.-China trade situation has presented challenges for our wide-body production plans."
Last month, China Development Bank Financial Leasing cancelled an order for 29 Boeing 737 Max jets, the grounded jet involved in two fatal crashes in late 2018 and March of 2019, reducing its total backlog to 70.