The Canadian government said Thursday it was reviewing potential defense deals with Boeing Co. in the wake of U.S. trade officials launching a probe into alleged subsidies and unfair discounts of passenger jets made by Bombardier Inc.
The Commerce Department said it could introduce tariffs as soon as this year on the Bombardier CS100 jets, drawing a strong rebuke from Canada's foreign minister after a move that inflamed already simmering trade tensions between the two nations that could impact a multibillion-dollar sale of Boeing combat jets.
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The Commerce Department investigation followed a complaint in April from Boeing alleging Bombardier was "dumping" its new CSeries jet with customers including Delta Air Lines Inc. in an effort to win market share, harming the U.S. company and domestic workers.
Canadian Foreign Minister Chrystia Freeland said the government "strongly disagrees" with the department's decision and added it is now reviewing current military procurement that relates to Boeing.
"Boeing admits it does not compete with exports of the CS100 aircraft, so it is all the more difficult to see these allegations as legitimate," she said in a statement.
The Boeing charge has been widely criticized by many aviation analysts as plane makers routinely sell initial aircraft at below-cost prices to win market traction, while Bombardier is offering a jet with little or no overlap to the U.S. company's own products.
Analysts had also warned Boeing's push against Bombardier could backfire by upsetting Delta -- which is also a big Boeing customer -- as well as the potential sale of 18 of the company's F/A-18 Super Hornet jets to Canada.
Ms. Freeland didn't identify the jet talks, but it is the only large-scale contract the country is discussing with Boeing.
Canada's potential purchase of the planes and sales to Kuwait and Qatar are central to extending the life of Boeing's combat-jet production lines.
Boeing didn't comment on the status of the sales talks with Canada, but said it values the country as a "customer and supplier-partner."
The Commerce Department announced its investigation during a hearing about the charges at the International Trade Commission before Bombardier or Delta had started their testimony, with Boeing officials still pressing their case.
Bombardier has called for the case to be dismissed and said its planes don't compete directly with the Boeing aircraft. Canada has denied it provided Bombardier with illegal subsidies.
The department said its probe will run parallel with the commission's investigation, which is due to report by June 12. If Bombardier is found to have broken U.S. rules, the Commerce Department said it could start collecting import tariffs this year.
The move adds to existing trade tensions between the U.S. and Canada, centered on the lumber and dairy industries.
Boeing filed a petition with the Commerce Department and the ITC alleging Canadian state subsidies created an unfair competitive threat to its own 737 Max 7 passenger jets, which are smaller than the CSeries
Brazil has also lodged a complaint with the World Trade Organization over Canada's support for Bombardier, which competes with plane maker Embraer SA.
Boeing wants the U.S. to impose antidumping duties on imports of Canadian passenger jets. The ITC offers a potentially quicker route than through the WTO. The U.S. and the European Union have been embroiled for years in disputes related to subsidies provided to Boeing and Airbus SE.
Delta last year placed an order for 75 CSeries jets, providing the program with a marquee customer after years of sluggish sales. It is due to receive the first planes in the second half of 2018.
Write to Doug Cameron at email@example.com
(END) Dow Jones Newswires
May 18, 2017 19:05 ET (23:05 GMT)