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Stiff US duties imposed on Bombardier Inc's
The U.S. Commerce Department on Tuesday slapped preliminary anti-subsidy duties of 220 per cent on the jets, which could effectively shut Bombardier out of the U.S. market if upheld, after rival Boeing
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 per cent before regaining ground to end down 7.5 per cent 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."
The duties create "a level playing field in the aerospace market," said another rival, Brazil's Embraer
Bombardier is a major employer in Quebec, where Prime Minister Justin Trudeau's Liberals say they need to win extra seats in an election set for October 2019.
"Boeing may have won a battle but, let me tell you, the war is far from over. And we will win," Couillard told reporters, describing the duties as an attack.
In Ottawa, Trudeau said the government was "disappointed and ... will continue to fight for good Canadian jobs." He has previously said Canada will not go ahead with plans to buy 18 Boeing F-18 Super Hornet fighter jets unless the challenge is dropped.
Canadian Trade Minister Francois-Philippe Champagne described it as a deplorable decision and one which shows that Boeing is not a "trustworthy partner."
"Our message to the Americans is to tell them that this decision will also have an impact on American suppliers and jobs in the United States," he added.
Broadening trade battle
The Boeing-Bombardier spat has snowballed into a bigger trade battle. Bombardier is a major employer in Northern Ireland, where a handful of legislators is keeping British Prime Minister Theresa May's minority Conservative government in power.
The duties on Bombardier mark the second U.S. trade action against Canadian companies since President Donald Trump took office. Earlier this year, the United States imposed preliminary anti-subsidy duties on Canadian softwood lumber.
Delta's CEO on Wednesday said Boeing's challenge was "absurd" and predicted the duties would not be made permanent when Commerce reaches a final decision next year.
Bombardier, which considered bankruptcy in 2015 and is undertaking a five-year plan to improve performance and margins, is still grappling with nearly $9 billion in debt.
The company also got snubbed by Siemens AG
Bombardier may need to raise more equity to support a capital-intensive business, according to Lorne Steinberg, president of Lorne Steinberg Wealth Management Inc in Montreal.