Trump Stumps Aviation Industry With His Revised Tariffs Obsession

The United States has implemented a series of substantial tariff changes in the first quarter of 2025 that directly affect the aviation sector. On March 4, it imposed 25 per cent tariffs on Canadian and Mexican-origin products, with the former’s energy products subject to a reduced 10 per cent tariff. Further complicating the trade environment, effective March 12, the US has imposed a worldwide 25 per cent tariff on steel and aluminium imports and certain derivative products.

This policy affects raw materials critical to aircraft manufacturing and maintenance. The Trump administration also plans to implement "reciprocal" tariffs on countries imposing duties on US products, creating the potential for escalating trade tensions across markets. The issue is that supply chains for aircraft manufacturers are incredibly complex. “A commercial aircraft contains more than two million parts, many sourced from Europe and Asia. Retaliatory tariffs, like those imposed by EU, can increase the costs of essential components like avionics, landing gear, and engines by five to 10 per cent, translating to an additional $3 to $5 million per aircraft.

In the short run, tariffs on raw materials like aluminium and steel create immediate cost pressures on aircraft manufacturers, particularly Boeing, which majorly relies on non-US-based suppliers. Given that aluminium accounts for 80 per cent of an aircraft’s structural weight, even a 10 to 25 per cent tariff on imported aluminium can increase the per-unit production cost of a narrow-body aircraft by $1.5-$2.5 million. Eventually, passengers may be left to foot the bill for the increased costs.

Since nearly 40 per cent of global airline fleets operate on leased aircraft, this cost increase would put upward pressure on ticket prices. Assuming that fuel prices remain stable, the aggregate cost increase across fleets could lead to a two to four per cent rise in airfares, with long-haul international flights seeing more pronounced effects due to exposure to cross-border tariff escalation. Imposition of tariffs across multiple major trading partners simultaneously—including Canada, Mexico and China—magnifies the potential impact on international air cargo. These countries represent vital trade corridors for US businesses, and the combined effect of bilateral tariffs creates substantial headwinds for cargo volumes.

The worldwide steel and aluminium tariffs also impact industries that traditionally rely on air freight for high-value, time-sensitive components. The broader economic ramifications of the tariff policies extend across the commercial aviation ecosystem. The tariffs are explicitly designed to promote and protect US manufacturing, which could accelerate re-shoring of aerospace production and assembly. This potential manufacturing shift presents opportunities and challenges—while it may stimulate domestic aerospace employment, it could also increase production costs and disrupt established supply chains optimised for global efficiency.

The aerospace industry has developed highly specialized global supply chains, with components often crossing borders during production. The new tariff structure adds complexity to these intricate manufacturing networks, potentially forcing redesigns of production systems that have been optimized over decades. The tariffs introduce new considerations for airlines and leasing companies concerning aircraft acquisition and fleet planning. The country of manufacture and substantial transformation now carries significant financial implications, which may influence decisions between otherwise similar aircraft options. This could alter the competitive landscape between manufacturers based in different regions, with long-term consequences on the market share.