Sunday, December 8th, 2019

Will a Jobs Argument Save the Boeing Iran Airplane Deal?

December 12, 2016 by Jim Walker  
Filed under Options Trading, Options Trading Tips

 

President elect Trump has threatened to impose tariffs of foreign goods, roll back the nuclear arms deal with Iran and promised to fight the defense industry over costs of weapons systems. Boeing was the target of one of Trump’s famous tweets. He said that $4 billion was too much to pay for the new Air Force One. Of course there will be two jets. And there is only a contract to begin the design of a plane that will replace the nearly 30 year old planes that carry and protect the president. Nevertheless companies like Boeing are the crosshairs for the next president. And now Boeing has taken advantage of the new opening with Iran and signed a $17 billion deal for airplanes. Will that deal may be nixed if Trump has his way. But, will a jobs argument save the Boeing Iran airplane deal? The New York Times says that Boeing speaks in Trump terms as it announces the contract to build jets for Iran.

Boeing announced a $16.6 billion deal on Sunday to sell planes to Iran, which for decades had been economically blacklisted by the United States. The company instead chose to emphasize how many jobs the sale would support.

“Today’s agreement will support tens of thousands of U.S. jobs” associated with the production and delivery of the planes, Boeing said in its news release.

The intended recipient of Boeing’s message clearly seemed to be President-elect Donald J. Trump.

Its carefully worded statement is emblematic of the tightrope that America’s biggest exporters are walking amid his threats to shake up trade policy and undo the Obama administration’s nuclear accord with Iran. That agreement lifted the American sanctions on Iran, making Boeing’s jet deal possible.

On our sister site, ProfitableInvestingTip.com we wrote recently about stocks at risk despite the Trump stock rally.

Trump may have been upset when the CEO of Boeing discussed the risk to his company if Trump engages in a trade war with China or he may have been sending a message to the entire defense industry that they will be held accountable to costs. A follow-up phone call from the Boeing CEO resulted in all sorts of positive comments. Never-the-less there may be stocks at risk despite the Trump stock rally. Which stocks are these?

The stocks in question are defense stocks and anyone who sells to countries like China and Iran. The issue for options traders is how much of this is hype and how much is real. The general consensus on high tariffs on Chinese goods is that the Chinese would fight back and send the nations into a nasty trade war. Add to that “the Donald” picking a fight over the “one China” issue and things could get nasty. The Washington Post puts it plainly. Trump risks war over the issue of Taiwan.

President-elect Donald Trump has just said that he considers America’s One China policy a bargaining chip, to be traded off against other things that the United States wants from China. In his description:

I don’t know why we have to be bound by a One China policy unless we make a deal with China having to do with other things, including trade. … I mean, look … we’re being hurt very badly by China with devaluation; with taxing us heavy at the borders when we don’t tax them; with building a massive fortress in the middle of the South China Sea, which they shouldn’t be doing; and, frankly, with not helping us at all with North Korea.

In other words, the One China policy isn’t a big deal – it’s a bargaining issue, like many other issues. So is Trump right?

Will a jobs argument save the Boeing Iran airplane deal? Will Trump start a trade war that drags the economy into the abyss? Will a shooting war evolve between nuclear armed China and the USA? There may be more at stake here than the stock market.

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