Get ready for a trade war dog fight.
Boeing Co. (BA - Get Report) shares traded lower Monday after China's Premier, Li Keqiang, said his government is prepared to continue talks with France linked to the purchase of Airbus SE (EADSY) aircraft in a signal that Beijing is ready to adjust some of its industrial strategies amid the threat of fresh trade tariffs from U.S. President Donald Trump.
Li met with France's Prime Minister, Edouard Philippe, in Beijing as European leaders wrapped-up a trade visit that culminated in a deal to increase the sale of French beef into the world's second largest economy and a vow to increase trade liberalisation between the two countries. Philippe has also been trying to secure an agreement to sell 180 Airbus A380 jets to the state-controlled China Aviation Supplies Holding Co, which carry a list price of around $18 billion, that was first floated by French President Emmanuel Macron earlier this year. Li also urged deeper international co-operation on trade going forward.
"Both sides believe that we must resolutely oppose unilateralism and trade protectionism and prevent such behaviour from causing volatility and recession in the global economy," he told reporters Monday at the Great Hall of the People in China's capital city.
The reference to Airbus purchases could also signal a shift away from the purchase of aircraft from Boeing, which is locked in a battle with the Franco-German aerospace giant for sales to China. The pair have about an equal share of sales to the world's biggest aviation market, which the Chicago-based planemaker thinks could require more than 7,000 new aircraft -- worth more than $1 trillion -- over the next two decades.
Boeing, which is often seen as one of the "front line" stocks in the U.S. China trade war, given its dependence on international sales, fell 2.3% in Monday's trading session.
"China is an important relationship for us," Boeing CEO Dennis Muilenburg told TheStreet. "The world needs 41,000 new planes, and more than 7,000 of those are in China. So we are doing well in China. Our Chinese airline customers are very important to us, we have a strong supply chain in China as well."
Boeing, however, has had some domestic success of late that has supported its share price, most notably through a $6.6 billion deal last week with FedEx Corp. (FDX - Get Report) 24 medium and large freighters.
Shares of the world's largest aircraft manufacturer rose on Wednesday, June 20, after FedEx Express, a division of the package delivery company, inked a $6.6 billion deal for 24 medium and large freighters.
FedEx ordered 12 767 freighters and 12 777 freighters, valued at $6.6 billion, as it takes steps to modernise its fleet by replacing ageing freighters, such as the three-engine McDonnell Douglas MD-11.