Trump’s Fees Worry Airlines

Follow-up

American airlines and aerospace industries are warning that tariffs from the administration of President Donald Trump could lead to a decline in the favorable trade surplus the sector has achieved over more than 70 years.

At Trump’s request, the U.S. Department of Commerce launched an investigation on May 1 to determine whether to impose tariffs of 10 to 20 percent on civilian aircraft and their parts, including engines.

However, the sector these tariffs are meant to protect quickly assured the administration that it is not interested in such protection.

In a letter to Commerce Secretary Howard Zandberg, obtained by Agence France-Presse, the Aerospace Industries Association stated that “imposing broad tariff and non-tariff trade barriers on imports of civilian aerospace technology poses a risk of undoing decades of progress and harming domestic supply chains.”

Stakeholders were given a deadline of June 3 to express their positions.

The following day, Zandberg announced that Washington aims to “set the standard for tariffs on aircraft parts” by the end of this month, stating that “the basis is to protect this sector,” adding:

“We will use these tariffs to enhance the U.S. sector.”

However, the AIA and Airlines for America expressed concern that the tariffs could ultimately harm American manufacturers.

AIA stated: “Unlike other sectors, the aerospace industry prioritizes domestic production of high-value parts and final assembly.”

According to the organization, exports from the U.S. aerospace and defense sectors reached $135.9 billion in 2023, including $113.9 billion for civilian aviation alone.

This allowed the sector to achieve a trade surplus of $74.5 billion and invest $34.5 billion in research and development, according to the organization.

The sector employs more than 2.2 million people in the United States across over 100,000 companies, producing goods valued at approximately $545 billion in 2023.

In its response to Zandberg, Airlines for America focused on the role of the “International Agreement on Commercial Aviation” in helping to mitigate tariffs and trade barriers for over half a century, stating that “the U.S. civilian aviation sector is the success story President Trump is seeking, as the sector leads the global civilian aerospace industries.”

The organization also noted that 84 percent of production was primarily American, emphasizing that Washington “does not need to fix the remaining 16 percent,” adding that “the current trade framework has improved our economy and national security, and is a vital part of maintaining our national security over time.”

Experts warn that for manufacturers, the potential tariffs would be like sand disrupting a machine that has operated smoothly for decades; they could also upset the delicate supply chains that are still recovering from the COVID pandemic.

Willie Walsh, the Director General of the International Air Transport Association (IATA), stated at the organization’s general assembly last week: “To avoid deterioration of the situation, we demand keeping the aerospace sector out of trade wars.”

Meanwhile, AIA clarified that “there is already significant demand for aircraft and their parts, while supplies are limited,” warning that “introducing new suppliers and expanding capacities is a complex and costly process that takes time,” noting that finding vendors that can meet stringent safety certifications could “take up to ten years.”

For its part, Delta Airlines defended the need to maintain the status quo, warning that the proposed tariffs “will disrupt Delta’s ability to maintain its current trajectory,” adding: “If tariffs are imposed on parts upon entering the United States, Delta will face a competitive disadvantage compared to its overseas rivals”; it continued that this “will impose unexpected taxes on Delta’s purchases of aircraft contracted years ago.”

Delta’s CEO, Ed Bastian, emphasized in late April that the company “will not pay tariffs on any aircraft deliveries we take,” adding that it “is working closely with Airbus” to mitigate the impact.

Delta stated in its message to Zandberg that it currently has 100 aircraft ordered from Boeing, noting that it is requesting that the Airbus A220 planes it ordered in Mobile, Alabama be manufactured primarily; however, it warned that if tariffs are enforced, “Delta will likely be forced to cancel existing contracts and reconsider contracts currently under negotiation.”