UK Markets close in 4 hrs 55 mins

US Mulls More Tariffs on EU Goods : Aerospace Stocks in Trouble?

Archan Sarkar

U.S. Trade Representative recently made an announcement regarding the possibility of additional tariffs worth $3.1 billion on imports from Spain, France, Germany and the U.K. The list of 30products, on which tariffs are likely to be imposed, includes certain helicopters and aircraft.

Last October, the United States levied $7.5-billion tariffs on aircraft and other goods from the European Union. No doubt, if implemented, the latest tariff will shake stock markets, with the Aerospace stocks facing the brunt.

Let’s delve deeper and see how the enforcement of this potential tariff will impact some of the U.S. Aerospace-Defense giants.

The Boeing Company BA, the largest plane maker in the United States, deploys a wide variety of products across its commercial aviation, space and defense programs developed by French software company Dassault Systemes SA DASTY. Boeing also deploys a variety of products on its commercial airplanes manufactured by France-based Safran S.A. SAFRY, ranging from LEAP-1B engines, wheels and carbon brakes, electrical wires, passenger seats, in-flight entertainment systems along with others products.

Meanwhile, Boeing relies substantially on deploying turbofan aircraft engines, also known as the Trent engines, for its 777 and 787 Dreamliner aircraft. These high-bypass turbofans are produced by Rolls-Royce RYCEY, a British multinational engineering company.

Interesting, in October 2019, Lockheed Martin LMT inked a multi-year collaboration with Dassault Systemes to deploy the latter’s 3DEXPERIENCE platform for strengthening its digital engineering initiatives and improve efficiencies of next-generation airplanes and helicopters. Lockheed Martin also procures key aircraft electrical applications from Safran that is deployed in the F-16 and F-22 military aircrafts.

The above discussion reflects the heavy dependence of U.S. Aerospace-Defense stocks on imports, particularly from European nations. Furthermore, per a CNBC report, the Office of the United States Trade Representative is considering the imposition of duties of up to 100% going ahead. If imposed, the already-struggling U.S. aerospace and defense companies, thanks toCOVID-19, will get exposed to more potential losses as increased import duty will shoot up product prices, thereby hampering profitability.

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.

See these 7 breakthrough stocks now>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
The Boeing Company (BA) : Free Stock Analysis Report
 
Dassault Systemes SA (DASTY) : Free Stock Analysis Report
 
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
Safran SA (SAFRY) : Free Stock Analysis Report
 
RollsRoyce Holdings PLC (RYCEY) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.