Bombardier shares fall after latest Trump attack

U.S. President Donald Trump’s latest attack on Bombardier Inc. BBD-B-T is spooking some investors as the Quebec plane maker gets dragged into Canada’s trade war with the United States with no talks in sight.

Bombardier shares were down 7 per cent to $293.49 in heavy trading on the Toronto Stock Exchange Tuesday morning. It’s the first trading day since Mr. Trump floated a ban on Bombardier jets sales in the United States over the long weekend.

Analysts say it’s not clear what legal mechanism the White House would use to stop the company from exporting into the U.S. and Mr. Trump hasn’t explained what he intends to do. But his threat, which comes as Canada imposes retaliatory tariffs on $28-billion worth of U.S. imports, is not a welcome development for the company.

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“NO MORE SELLING BOMBARDIER IN THE UNITED STATES! Their products aren’t good enough!” Mr. Trump wrote on his social-media platform Monday afternoon. “If they want our Market, they must build here, and stop treating America like a ‘piggy bank.’ ”

The stakes are massive for the company, which sells more than half its production volume into the U.S. market. They’re also major for Quebec, with one of its main exporters now under threat by Canada’s biggest trading partner.

“This no doubt elevates uncertainty for Bombardier,” National Bank analyst Cameron Doerksen said in a research note. “While we had thought that the trade-related risk for Bombardier was in the rear-view mirror, it is clear that the U.S. President is going to escalate the trade dispute by targeting one of Canada’s most important exporters.”

In a struggling economy, Canada’s aerospace industry is flying high

This past July, the U.S. Department of Commerce wrapped up a Section 232 investigation into aerospace imports of commercial aircraft, engines and related parts and determined they present a national security threat.

“Decades of foreign government market interventions have unfairly eroded our producers’ global market share,” and affected the ability of American companies to meet economic and national defence demands, a White House fact sheet published July 9 reads.

For now, Canadian aerospace exports remain tariff-free under the Trump administration’s exemption for goods stamped as compliant under the United States-Mexico-Canada Agreement.

Many executives and legal experts say chances are low that the aerospace industry will be the subject of any drastic changes, in part because the U.S. is a major net exporter of aircraft and parts. America’s aerospace and defence sector has maintained a positive trade surplus for more than 70 years – the only manufacturing industry in the country with a positive trade balance, according to the U.S. Aerospace Industries Association.

Any change would rip through the supply chain, with potential negative effects both in the U.S. and internationally. Bombardier, for example, has 2,800 suppliers in the U.S. and has warned that any new American duties would probably cause more pain south of the border than in Canada in terms of jobs and layoffs.

This isn’t the first time Mr. Trump has taken aim at Bombardier.

In January, he accused Canada of unfair trade practices and said the U.S. would decertify all Canadian and Bombardier-made jets unless Transport Canada approved aircraft made by Gulfstream. He also threatened a 50-per cent tariff on new aircraft made in Canada.

The Canadian regulator subsequently certified key Gulfstream business-jet models for use back in February and the flashpoint ended.

In 2017 during President Trump’s first mandate, the U.S. imposed tariffs of 292 per cent against Bombardier after aerospace giant Boeing filed a trade complaint against the company over its C Series passenger jet. The penalties were later overturned by the U.S. International Trade Commission, but the fallout led to Bombardier selling a majority stake in the C Series program to Airbus.

Mehran Ebrahimi, professor of management at the University of Quebec at Montreal, said his concern is that the U.S. turns to the same tariff playbook now against Bombardier. The president can’t target a specific company but he can a specific type of jets with certain characteristics that would end up impacting a specific company.

“This is serious,” Mr. Ebhrami said. “This is the piece that is worrying me the most.”