Coverage: New Bombardier tariff could force response

New U.S. duties imposed on Bombardier Inc.’s CSeries jet sparked retaliatory threats from Britain and Canada’s Quebec province on Wednesday as the dispute overshadowed North American trade talks and led to a drop in the jet maker’s stock.

Allison Lampert and Amanda Ferguson of Reuters had the news:

The topic loomed large at North American Free Trade Agreement (NAFTA) talks in Ottawa where the countries acknowledged relations between Washington and Ottawa had become strained over the U.S. action.

Canadian Foreign Minister Chrystia Freeland said she raised the issue with U.S. Trade Representative Robert Lighthizer. He told reporters: “I‘m not saying it doesn’t have an effect on relationships – it does – but not on this negotiation.”

The duties, which came on the same day Bombardier was left out of a rail tie-up, sent its shares and bond prices lower. The shares initially fell 14 percent before regaining ground to end down 7.5 percent at C$2.10. Many of its junk-rated bonds also fell, according to MarketAxess data.

“This puts a cloud over the company with regard to the CSeries,” said Bryden Teich, portfolio manager at Avenue Investment Management. “As long as there’s this uncertainty, it will affect the share price.”

Frederic Tomesco and Andrew Mayeda of Bloomberg reported on the stock price fall:

Bombardier’s widely traded B shares dropped 8.8 percent to C$2.07 at 1:52 p.m. in Toronto after sliding as much as 16 percent for the biggest intraday decline since October 2015.

The company’s U.S. dollar bonds fell the most since being issued last year. The price on the 8.75 percent note due in 2021 declined 3 cents on the dollar to $107 on Wednesday afternoon in New York, according to data compiled by Bloomberg.

The C Series duties compounded an ugly day for Bombardier, which earlier Tuesday was left out in the cold when Germany’s Siemens AG spurned the Canadian company as a partner for a major rail merger in favor of France’s Alstom SA. That left Bombardier’s train-making unit, the company’s largest, on its own against the new European giant and Asian heavy hitters such as China-based CRRC Corp. and Hitachi Ltd. of Japan.

The tie-up “threatens the long-term success’’ of Bombardier’s rail unit, David Tyerman, a Cormark Securities analyst, said in a note. Bombardier still has the potential to participate in consolidation, “but the logical partners appear gone.’’

Gordon Raynor, Laura Hughes and Iain Withers of The Telegraph report that British prime minister Theresa May has threatened a trade war:

The US Department of Commerce decided Bombardier aircraft, built in Northern Ireland, should be subject to 219 per cent import duty after the American aviation giant Boeing complained that Bombardier had been given unfair state aid.

The Government responded by warning that Boeing’s behaviour “could jeopardise” future Ministry of Defence contracts for its aircraft such as Apache helicopters.

The Prime Minister has appealed directly to President Donald Trump to intervene in the dispute, which has dented her hopes of signing a post-Brexit free trade deal with the US.

The escalating row has also put the Conservatives’ relationship with the DUP under strain, as Bombardier employs more than 4,000 people at its Belfast factories.