Boeing monitoring US tariff plan as analyst weigh impact on Malaysia

New Straits Times

a day ago

KUALA LUMPUR: American aircraft manufacturer The Boeing Company is keeping a close eye on Washington's proposed 25 per cent tariff on Malaysian imports as industry stakeholders warn of serious consequences for the local aerospace sector if the duties are imposed.
Boeing's spokesperson told Business Times that the company is actively engaging with relevant authorities to mitigate the impacts of the proposed new tariff on the global aviation system.
"We are closely tracking tariff developments and are working with policymakers to mitigate impacts of the global aviation system," the spokesperson said when inquired recently.
The proposed tariff, part of President Donald Trump's broader 'America First' trade agenda includes a blanket 10 per cent tariff on all imports, with higher rates of over 100 per cent for goods from China, and a targeted 25 per cent tariff on selected countries, including Malaysia.
The tariff on Malaysia was increased by one per cent from 24 per cent when it was announced earlier this year.
One of the companies that may potentially be affected with the new tariff, should it be implemented, is Boeing Composites Malaysia (BCM) in Kedah.
BCM produces composite parts such as aileron skins, flat panels and trailing edges for Boeing commercial aircraft models including the 737, 777 and 787 Dreamliner.
The factory, which is Boeing's first wholly-owned subsidiary in Southeast Asia, has been a cornerstone of Boeing's sourcing strategy in the region.
The factory employs over 1000 Malaysians and contributes to the development of local talents in advanced manufacturing and aerospace engineering.
Aviation consultancy Endau Analytics founder and aviation analyst Shukor Yusof said there is still time for Malaysia to renegotiate with the US on the tariff.
He believes that Boeing has a contingency plans in place should the tariff is imposed.
"Tariffs have yet to take place, there's time to negotiate and make a deal. Boeing is a big contributor to the US economy and it is unlikely that Washington would cut off its nose to spite its face.
"That said, I'm sure Boeing would have put into place a game plan to prepare for any eventuality," he told Business Times recently.
Boeing global president Dr Brendan Nelson told Business Times in an exclusive interview in March this year that Malaysia continued to be an integral part of Boeing's operations, particularly through BCM.
"Malaysia is not just a customer for us, it's a trusted partner. Our BCM factory in Kedah is one of the best examples of how we are investing in the local economy and workforce," he said, adding that there is a little piece of Malaysia in every single Boeing airplanes.
Meanwhile, Shukor warned that Malaysia's aviation sector could face a grim outlook if the new tariff on the country is imposed without exemptions for aerospace components.
"The impact will be costly, in terms of declining productivity and job losses. This is why the Investment, Trade and Industry MInistry and those involved in the dealing with the US administration need to consider all aspects of the equation," he said.
Despite the possibility of a grim aerospace outlook, Shukor said it is unlikely that Boeing and other aerospace original equipment manufacturers would shift their manufacturing activities away from Malaysia.
"No. These are long-term investments. BCM has been around since 1998, much have been ploughed into it and any shift (if at all) will take a long gestation period before it becomes a reality. And it will be very expensive," he said.
Shukor added that Malaysia still holds strong advantages for aerospace investment due to the country's location, ease of doing business and low costs.
Boeing's rival European plane-maker Airbus SE is already exploring its wings in Sarawak, Shukor said while Invest Selangor Bhd has done a good job bringing aviation investments into the state.
On 16 July, Boeing opened a new corporate office in Kuala Lumpur, reaffirming its long-term commitment to Malaysia's aerospace ambitions under the Aerospace Industry Blueprint 2030.
Boeing's relationship with Malaysia stretches back over 70 years, beginning in 1947 when Malayan Airways Ltd acquired its first Douglas DC-3 aircraft.
Since then, the American aerospace giant has played a crucial role in Malaysia's aerospace development from commercial aviation and defence to education and community development.
Local airlines that are operating Boeing airplanes include Malaysia Airlines Bhd, Firefly Sdn Bhd and Batik Air Sdn Bhd.