Boeing, Trade Wars, and Disclosures

Earlier this week we saw news that China has told local airlines there to stop taking delivery of Boeing airplanes, Beijing’s latest retaliatory move against President Trump’s tariffs. That gives us opportunity to consider the potential implications for financial reporting and risk disclosure — implications that might snare more companies as the trade war drags on. 

The question is simply this: What has Boeing disclosed about its exposure to China, and what can we infer from those disclosures about the trade war’s possible effect on Boeing financial performance? 

First stop is Boeing’s 10-K, filed on Feb. 3 — before Trump announced his tariffs and ignited the US-China trade war. There on page 36, in the Management Discussion & Analysis, Boeing said the following:

As of Dec. 31, 2024, we had approximately 55 737-8 aircraft in inventory that were produced prior to 2023, including approximately 40 aircraft for customers in China. We expect to deliver these aircraft in 2025.

OK, that’s 40 aircraft destined for China sometime this year. Now Beijing has told Chinese airlines not to take delivery of those aircraft. 

How much might that cost Boeing? We outside the company don’t know, but online estimates are that a new Boeing 737-800 costs an average of around $105 million. Forty planes multiplied by an average cost of $105 million implies that $4.2 billion could be at risk.

Except, we also don’t know how many of those 40 planes might already have been delivered to Chinese airline customers, although at least one, a Boeing 737 Max, was recalled back from Chinese to U.S. territory this morning. More are likely to follow. 

Boeing did release a statement on April 8 saying that it delivered 105 737 aircraft in first-quarter 2025. That statement did not, however, say how many of those 737s were specifically 737-800s, nor how many might have been delivered to Chinese customers. 

Boeing does report geographic revenues, and includes an “Asia” segment that reported $12 billion in commercial aircraft sales in 2024; but we don’t know how much of that $12 billion can be attributed specifically to China versus other Asian nations. (See Figure 1, below.) Worldwide revenue for Boeing’s commercial aviation segment was $22.86 billion. That was 34.3 percent of the company’s total 2024 revenue, which was $66.51 billion. See Figure 1, below.

 

 

If China refuses delivery of all 40 737-800s scheduled for delivery this year, and that estimated average price of $105 million is accurate, and Boeing sees none of the $4.2 billion suggested by that math — that would be a gut-punch to its commercial aviation segment this year. Even if our math is somewhat off, the potential hit is still a big number. Even if the math is off by half, half of $4.2 billion is still a material number for Boeing’s commercial aviation segment. The trade war consequences for Boeing are clearly material, and unavoidable.

No wonder Boeing’s share price plummeted from $168.50 on April 2 (“liberation day”) to $136.50 immediately thereafter, although the price has since recovered to around $155 lately.

From Boeing to Bigger Trade Questions

Boeing reports Q1 2025 earnings next week. It will be interesting to see what the company says about its China customers, because clearly Trump’s trade war is making that market more material by the day. Trump’s pressure on China, plus China’s decision to retaliate, is a qualitative factor amplifying what is already a quantitative risk for most global companies. So how do you describe all that to investors? 

That’s the interesting disclosure question here. A fair number of large U.S.-listed companies do report revenue from China as a distinct geographic segment, but lots of others don’t. They report a larger “Asia” segment like Boeing does, or they don’t report any geographic segments at all. 

Well, could that change as Trump’s trade war puts China-based revenue at risk? Should it change — meaning, do investors have a right to know that information? Should companies split out China as its own geographic segment in whatever Segments footnote you provide, or would it suffice to talk about China operations in the Management Discussion & Analysis or Risk Factors disclosures in the 10-Q? 

Boeing did say this about China in its discussion of risk factors:

If we are unable to deliver aircraft to customers in China consistent with our assumptions and/or obtain additional orders from China in the future, we may experience reduced deliveries and/or lower market share. Impacts from future potential deterioration in geopolitical or trade relations between the U.S. and one or more other countries could have a material adverse impact on our financial position, results of operations and/or cash flows.

That’s vague, but is it sufficient anyway? After all, the trade war could end within a few months, so what’s the point of investing the time and effort to split out and report a China geographic segment when you wouldn’t do so without Trump’s trade war driving the issue? 

These are all questions a company’s financial disclosure team should discuss with their auditor and presumably their board’s audit committee. 

We should also note that Boeing isn’t the only business out there trying to figure out these difficult geopolitical risks. Today the Financial Times reported that China has stopped importing liquified natural gas from U.S. sources; the last such delivery happened on Feb. 6.

Well, one of the largest LNG exporters in the United States is Cheniere Energy, which reported $854 million in revenue from Chinese customers in 2024; that’s 5.4 percent of Cheniere’s total 2024 revenue of $15.7 billion, clearly a material amount. 

The closest that Cheniere came to discussing trade war pressures in its 10-K (filed Feb. 20, pre-liberation day) was a single bland sentence: 

Any changes to local, domestic or international tax laws and regulations, or their interpretation and application, including those related to tariffs and duties, could affect our obligations, profitability and cash flows in the future.

Cheniere will file first-quarter results on May 8. Let’s see what the company says then.