The aviation industry faces uncertainty, after President Donald Trump’s announcement of a universal baseline tariff of 10pc on imports, with elevated rates of 20pc on Europe and up to 25pc on goods from Canada, Mexico, and China. Boeing share price dropped by 3.5pc, Airbus share price by 3pc.
The aerospace sector, heavily reliant on a global supply chain, faces challenges as tariffs on critical materials like aluminum and steel increase production costs for manufacturers such as Boeing.
Canada and Mexico, as major suppliers, are poised to respond with counter-tariffs. American airlines that have airbus orders include American 135 ($18.1BN), Delta 119 ($23.7BN), United 140 ($18.9BN), JetBlue 63 ($7.4BN), Spirit 92 ($10.2BN), Frontier 141 ($15.6BN), Breeze 70 ($6.4BN). Total 760 (~$100BN).
The announcement, made on April 2, 2025, and dubbed “Liberation Day,” aims to address trade imbalances and protect American manufacturing. These tariffs are set to take effect in the coming days, with some, like the 25pc tariff on foreign-made cars, starting as early as midnight EST on April 3, 2025. For aircraft manufacturers, this policy shift introduces both challenges and complexities due to the industry’s reliance on a global supply chain.
The aerospace sector, a cornerstone of U.S. manufacturing, is particularly vulnerable to these tariffs. Companies like Boeing, the largest single exporter in the U.S., depend on a intricate network of international suppliers. A Boeing 737, for instance, comprises about 2m parts sourced from approximately 700 suppliers worldwide, including key countries like Canada, Mexico, China, France, Japan, Germany, and the United Kingdom. Tariffs on critical materials such as aluminum and steel—already set at 25pc—increase production costs for these components. Additionally, electronic systems, which account for 20-30pc of an aircraft’s cost, often rely on parts from China, where a 10pc tariff (potentially rising further) could raise expenses significantly. Analysts estimate that these duties could increase the absolute cost of an airplane by single-digit percentages, a burden likely passed on to airlines and, ultimately, consumers through higher ticket prices.
Boeing is likely to be more impacted by Airbus should a new round of tariffs ensue. It faces a dual threat: rising input costs and potential retaliatory tariffs from affected countries. Canada, a major supplier of aerospace components and the U.S.’s top import partner in this sector, exports $8.91 billion worth of aerospace goods annually to the U.S. A 25pc tariff on Canadian imports could disrupt this flow, especially for items like landing gear and engines used in Boeing aircraft. Similarly, Mexico’s growing aerospace industry, with 368 manufacturing entities by mid-2022, supplies parts that could face the same 25pc levy. China, Boeing’s largest customer, has 144 undelivered aircraft orders, mostly 737s, and further tariffs could jeopardize this market, especially if China retaliates by favoring Airbus or its domestic COMAC C919. Europe, too, might impose counter-tariffs, making Boeing jets pricier in that key market, where Airbus already has a manufacturing foothold in the U.S. (e.g., Mobile, Alabama) that could shield it from some tariff impacts.
Airbus, Boeing’s European rival, may fare better under this tariff regime. While its aircraft assembled in Hamburg or Toulouse could face import duties if delivered to U.S. customers, its U.S.-based facilities in Alabama, Mississippi, and Florida provide a buffer. Components imported to these sites might still incur tariffs, but Airbus’s American production could exempt it from the full brunt of duties on finished planes, potentially giving it a competitive edge. Analysts suggest Airbus could also redirect deliveries to non-U.S. markets like China, where Boeing’s sales might falter amid trade tensions. However, both companies will grapple with higher costs for aluminum, steel, and electronics, though Airbus’s diversified manufacturing may mitigate some losses.
Smaller players like Embraer, a Brazilian manufacturer, could also be hit hard. Its E195-E2, aimed at U.S. mainline carriers, lacks a U.S. final assembly line, making it fully subject to tariffs on imports from Brazil, which could face rates above the 10pc baseline due to Trump’s reciprocal trade policy. General aviation manufacturers, represented by groups like GAMA, warn of “enormous unintended consequences,” noting that 46pc of their 2023 billings ($5.2 billion) came from exports, which could shrink if retaliatory tariffs emerge.
The broader impact hinges on implementation details and foreign responses. Canada and Mexico, heavily reliant on U.S. trade, have already signaled retaliatory measures, with Canada targeting aerospace materials like aluminum in past disputes. China’s history of counter-tariffs on U.S. farm exports suggests it could again sideline Boeing. The Aerospace Industries Association and unions like the IAM urge a pause on tariffs, citing risks to 2m U.S. jobs and a $125 billion export industry. While Trump argues these measures will boost domestic manufacturing, experts warn of supply chain disruptions, higher costs, and a potential “nightmare scenario” for an industry still recovering from pandemic setbacks and Boeing’s quality issues. The full fallout remains uncertain as manufacturers brace for a turbulent adjustment period.
