US President Donald Trump has said that his administration may impose export controls on Boeing sales to China, in response to Beijing’s new restrictions on exports of rare earth minerals.
Speaking during a White House press briefing on Friday (October 10), Trump was asked what else besides software could be “on the table” if his administration were to respond in kind to China's latest controls.
“A lot more,” said Trump. “I mean, we have airplanes. We have airplane parts. They have a lot of Boeing planes and they need parts, and lots of things like that.”
He went on to say that China's President Xi Jinping gave no warning prior to announcing the new controls, which will impact exports of rare earth minerals to all countries, not just to the US.
“This is not something that I instigated,” he said. “This is something that they did. And they didn't really aim it at us. They aimed it at the whole world.”
Nonetheless, Trump said he has a “very good relationship” with Xi, and will not cancel the two leaders' next planned meeting, despite threatening to do so previously.
That meeting is expected to take place at the end of this month, when the Asia-Pacific Economic Cooperation (APEC) forum gathers in South Korea.
On October 9, China’s Ministry of Commerce (MOFCOM) announced new controls on overseas entities seeking to export items that contain Chinese-origin rare earth minerals.
The new rules will apply to any item in which rare earth minerals make up at least 0.1% of its total value, meaning that items with even trace amounts of such minerals will be affected.
The restrictions cover rare-earth mining, processing, recycling, magnet manufacturing technologies, and related equipment and techniques.
Entities seeking to export such items will require a dual-use export licence from China.
For defence entities overseas, China will refuse to grant such licences, while for semiconductor-related use cases, China may grant or refuse licences on a case by case basis.
Both China’s new controls and Trump’s comments are seen as highly disruptive to import-export industries that rely on rare earth minerals, such as the manufacturing of next-generation aviation engines.
Neodymium, praseodymium, dysprosium and terbium are some of the rare earth minerals that are essential for the production of next-generation engines, and are, at present, largely sourced from China.
Following Trump’s comments, the S&P 500 closed the day down 2.7%, while the Dow Jones Industrial Average closed 1.9% down and the Nasdaq 3.6% down.
Trump’s suggestion that Boeing parts may be used as a bargaining chip are likely to undermine the manufacturer’s positive outlook going into the fourth quarter.
As covered by Airline Economics, Boeing is expecting its production cap on 737 MAX aircraft to be lifted from 38 to 42 units during the fourth quarter.