Aerospace Faces Tariff, Supply Chain, and Parts Shortage Issues

The aerospace industry continues to face uncertainty as tariffs are imposed and withdrawn, compounding existing challenges like supply chain disruptions and parts shortages. The unpredictable tariff landscape has heightened concerns over delivery delays and slowed production.

Negotiations between airlines and manufacturers are underway to determine who will bear the cost of tariffs. Delta Air Lines has announced its preference to delay aircraft deliveries rather than absorb the additional costs. CEO Ed Bastian emphasized that the airline will not pay tariffs on incoming aircraft.

Manufacturers are also seeking clarity as rising costs and market hesitation slow production. In February, Airbus CEO Guillaume Faury indicated that if tariffs take effect, the company may shift its focus to non-US clients. Delays have also affected shipments of RTX engines as the company works to comply with the United States-Mexico-Canada Agreement (USMCA).

The aerospace sector has largely avoided direct tariff impacts, thanks to compliance with agreements like the USMCA. President Donald Trump clarified that products meeting USMCA standards would not be subject to tariffs, a stance confirmed by both Airbus and Boeing.

However, broader supply chain pressures persist, exacerbated by a 25% tariff on aluminum and steel. In March, Boeing's CFO Brian West expressed concern about these tariffs limiting access to critical components. Howmet Aerospace, a key supplier to both Airbus and Boeing, declared a force majeure event in response to potential trade restrictions, warning it may halt deliveries.

Aircraft orders, typically placed years in advance, now face delays that could increase costs for manufacturers and ultimately lead to higher airfares. Historically, aerospace products have benefited from duty-free trade under agreements involving the United States and Canada since 1979, although Mexico has been excluded.