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Recent months have seen disruptions across various sectors, with vehicles, consumer products, and industrial machinery stuck at ports, lingering on rail cars, and accumulating in warehouses as a result of the inconsistent tariff policies from the White House.
Typically, U.S. buyers place orders for airplanes and engines several years ahead of time. However, the ongoing tariff ambiguity threatens to delay these shipments, despite the aerospace industry not being directly targeted for such duties. According to industry insiders, the fluctuations in tariffs and resultant costs are putting additional strain on a supply chain already dealing with parts and labor shortages.
In a plant located near Montreal, workers at Airbus have been tasked with constructing a single-aisle A220 jet over the past several months. The uncertainty surrounding the tariff situation has left it unclear whether this aircraft, intended for Delta Air Lines, will face a 25% duty upon delivery.
Depending on how the situation resolves, Delta may end up receiving the 130-seat plane without any tariffs, or it may have to pay dues to the U.S. government for components sourced from outside the country. According to Cirium, an aviation analytics company, the delivery is slated for June.
Both Delta and Airbus have chosen not to comment on the potential tariff implications for the A220 jet.
Historically, tariffs have had minimal impact on the aerospace sector. The industry has mostly functioned under a treaty established in 1979 that ensures zero-duty trade between the U.S. and Canada, though it does not include Mexico. This stability was disrupted during the 18-month tariff dispute concerning subsidies for Airbus and Boeing that unfolded in 2020 and 2021.
President Donald Trump’s pattern of altering tariffs during the A220’s assembly serves as a reminder of the added risks posed to both aircraft manufacturers and airlines under his strategy.
In early February, as the assembly of the plane progressed in Mirabel, Que., Trump hinted at imposing a 25% tariff on imports from Canada and Mexico. This tariff could significantly increase costs for Delta, which values the plane at approximately $40.5 million, as indicated by Cirium’s delivery data for 2024.
Shifting Tariff Policy
Just as this tariff was about to take effect, Trump postponed its implementation for 30 days, subsequently announcing that goods meeting the criteria of the U.S.-Mexico-Canada Agreement (USMCA)—which he had negotiated—would be exempt from duties. This sudden requirement compelled Canadian aerospace companies to rush to ensure their paperwork was compliant.
It was believed that the recently painted Delta aircraft adhered to the 2020 agreement, thereby qualifying for an exemption from tariffs, according to industry sources. Bombardier confirmed that its jets met these compliance standards and had been delivered to U.S. clients without incurring duties.
However, the ongoing confusion over tariffs prompted Airbus to update its employees about the complexities and evolving nature of the situation during a recent factory meeting.
The uncertainty surrounding tariffs is likely to intensify negotiations between airlines and manufacturers over who will bear the financial burden. On a recent occasion, Delta announced that it would push back deliveries rather than incur tariffs, as it seeks to manage costs amidst a decline in travel demand.
“We want to be clear that we will not be liable for any tariffs associated with aircraft deliveries,” Delta’s CEO Ed Bastian stated during an analysts’ meeting. “We have communicated this clearly to Airbus, and we’ll navigate these situations as they arise.”
Unprecedented Uncertainty
By the end of 2024, Delta expects to receive 43 aircraft from Airbus, with several of these jets anticipated to be produced outside the United States.
Airbus’s CEO, Guillaume Faury, expressed in February that the company may prioritize shipments to non-U.S. clients if tariffs start obstructing imports.
After Trump’s announcement of a 90-day freeze on various tariffs, Treasury Secretary Scott Bessent indicated Canada might still face a 10% tariff alongside other nations, only for a White House official to later clarify that no alterations were being made.
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Following Trump’s unexpected decision to pause his reciprocal tariff policy, global stock markets reacted positively, reflecting investor relief. Ultimately, no new tariffs on Canadian goods were implemented—for the moment.
The confusion resulting from these tariff policies has created significant disruptions within the aerospace industry. For instance, deliveries of RTX engines from one of its Canadian subsidiaries to U.S. clients were momentarily halted as the company worked to secure documentation to demonstrate compliance with the CUSMA agreement, according to two senior industry executives. RTX has opted not to comment.
Bastian warned of “unprecedented uncertainty” stemming from the situation, noting that it has contributed to a slowdown in travel demand. He voiced a hope that policymakers in Washington would take notice of the seriousness of these complications.
Source
www.cbc.ca