Boeing's China Deliveries: A Critical Step Toward Profitability and Supply Chain Stability

The U.S.-China tariff truce, announced in late April 2025, has unlocked a pivotal opportunity for Boeing, enabling the resumption of commercial aircraft deliveries to China after a 14-month hiatus. This development, which includes a 90-day reduction of punitive tariffs from 145% to 30% on U.S. imports and reciprocal measures from China, addresses a key bottleneck in Boeing's supply chain and financial health. For investors, the move signals a potential turning point for the aerospace giant, as it tackles inventory overhang, stabilizes cash flow, and reclaims market share in a critical growth market.

Tariff Truce Eases Inventory Pressures, Reduces Risk

Boeing's backlog of commercial aircraft destined for China accounted for 10% of its total global backlog—approximately 130 planes—as of Q1 2025. Among these, 96 were 737 MAX variants, critical to the company's profitability. The tariff ban had forced Boeing to hold 25 pre-built MAX units and other aircraft in inventory, incurring $1.8 billion in deferred production costs by early 2025. The tariff truce now allows these aircraft to be delivered, reducing Boeing's inventory burden and freeing up capital.

The resumption of deliveries is expected to generate roughly $1.5 billion in revenue in 2025 alone, with Boeing targeting 50 Chinese deliveries this year. This cash infusion is timely, as the company grapples with production ramp-up costs for the 737 MAX and 787 Dreamliner programs.

Production Gains and Cash Flow Stabilization

The tariff truce aligns with Boeing's ambitious production targets. The company aims to boost 737 MAX output to 42/month by mid-2025, with a stretch goal of 47/month by year-end, pending FAA certification of newer variants like the MAX 7 and MAX 10. These models are critical to compete with Airbus's A320neo series, which has dominated orders in Asia.

However, risks persist. Quality issues in the MAX's new variants—such as door plug failures and wing-body joint irregularities—could delay certification and production, squeezing margins. Meanwhile, Beijing's retaliatory tariffs on U.S. components (now reduced but still present) have forced Boeing to absorb higher costs for parts like Italian-made wing assemblies for the 787. This complicates its goal of increasing 787 production to seven/month and certifying the 777X.

Competitor Dynamics: A Race Against Airbus and COMAC

The tariff truce enables Boeing to counter Airbus's recent dominance in China. While Airbus secured 60% of China's narrowbody orders in 2024, Boeing's renewed access could reverse that trend. Chinese airlines, including China Eastern and Air China, have expressed interest in the MAX 10, which offers greater range than the A320neo.

Yet Boeing faces a longer-term threat from China's state-backed COMAC, whose C919 narrowbody has garnered over 1,000 orders. While the C919's reliance on Western engines and avionics limits its competitiveness in a trade war, Boeing's ability to deliver to China now ensures it retains a foothold in the region's booming aviation market, which is projected to grow at 5% annually.

Geopolitical Risks Loom Over the Truce

The tariff agreement's fragility underscores systemic risks. The 90-day “pause” leaves unresolved issues like Taiwan and the South China Sea, which could reignite trade tensions. A renewed conflict would jeopardize Boeing's supply chain: 40% of its suppliers operate in China, and its $1.1 billion legal settlement over the 737 MAX crashes has already eroded investor confidence.

Investors must also consider that Chinese airlines may delay orders if economic growth slows—a 50% likelihood, according to analysts. Boeing's stock, up 22% year-to-date, has already priced in much of the tariff truce's benefits, leaving little room for error.

Investment Thesis: A Balanced View of Recovery Prospects

The resumption of deliveries is a clear positive for Boeing, reducing inventory costs and stabilizing cash flow. The MAX's production ramp-up, if executed smoothly, could boost margins and offset competition from Airbus and COMAC. However, execution risks—quality control, regulatory approvals, and geopolitical volatility—remain high.

For investors, Boeing presents a compelling but nuanced opportunity. Its valuation (P/E 18.5x) reflects near-term optimism but hinges on FAA approvals, tariff permanence, and China's aviation demand. A “buy” rating makes sense for long-term holders willing to tolerate volatility, while short-term traders should await clearer signals on production and geopolitical stability.

In conclusion, Boeing's China deliveries mark a critical step toward profitability but are no guarantee of sustained success. The company's ability to navigate regulatory, operational, and geopolitical hurdles will determine whether this truce becomes a lasting turning point—or a fleeting reprieve.

Investment recommendation: Boeing (BA) is a hold with upside potential if production ramp-ups and trade tensions stabilize.