Tariff Takedown: How US Trade Barriers Could Cripple Global Aviation

The Looming Threat of Tariffs to Global Aircraft Manufacturing

Imagine a future where buying a new Boeing or Airbus suddenly costs US Airlines tens of millions of dollars more, where airlines delay buying new aircraft and where workers on the Boeing assembly line in Everett or Gulfstream in Savannah are laid off since the planes they make are no longer competitive with their foreign-made competitors in France, Brazil and even China. Sounds a bit dramatic? Well, it might already be happening. In today's article, we're diving into the complex and potentially devastating effects that tariffs, specifically those announced recently by the United States, could have on global aircraft manufacturing. I will look at how tariffs affect a plane like the Boeing 787, what they mean for the hundreds of companies in the aerospace supply chain and how these trade barriers could end up reshaping the entire industry. Now, before we go on, I want to make something very clear here. I always try to avoid politics on my channels, but these announced US tariffs and their effects are objectively the biggest threat towards the aviation business right now, and that means that simply just ignoring this story because it's sensitive would be just cowardly and wrong.

The Profoundly Global Nature of Aircraft Production

So, why are tariffs such a threat then? Well, that's because aircraft manufacturing isn't just global, it's arguably the most global industrial process on earth. If there is one industry that doesn't just depend on global trade, but defines it, it is definitely aviation, and tariffs don't mix very well in that kind of complexity. Every modern commercial jetliner is a collaboration between dozens of different countries, so even if the final assembly happens in the US, the parts, materials and systems that make that plane fly come in from all over the world. Remember the 737 MAX 9 door plug blowout that happened last year? Well, that door was, for example, made by Spirit Aero Systems in Malaysia, and then installed in Kansas before the fuselage was shipped to Renton in Washington. And, of course, it goes in the other direction as well. The center fuselage section for the Airbus A350 is made in North Carolina, and then shipped over to France where it is assembled. Modern airplanes are truly global machines, so trying to build one entirely within the borders of a single country, any country, is nearly impossible.

Understanding Tariffs: A Tax on Imported Goods and Their Historical Context

Now, before we get too deep into this, we also need to understand exactly what a tariff is, and how it affects the price you pay to get on a plane. Now, of course, I'm a pilot, not an economist, so this is obviously going to be a little bit simplified. The easiest way to look at it is that a tariff is a tax on a good that comes into a country. Tariffs are actually an old idea that dates all the way back to the city-state of Athens in ancient Greece, which charged a 2% premium on all grain and goods that came in through the port of Piraeus. Then, starting in the 15th century AD, tariffs, as we know them today, first appeared in the UK when the Crown issued them to try to encourage local manufacturing of textiles. And that set up the precedent of tariffs as a way to protect and encourage local industry, which, by the way, can be seen as a reasonable goal for a government, any government, assuming that the local production is actually possible.

The Economic Impact of Tariffs on Aircraft Manufacturing Costs

Now, a modern tariff is essentially a tax paid by the personal company that buys a good from another country, which is paid then to the government by that importer once it arrives into the country. So, it is very important to point out that it's not the source country that pays this, it is the customer, and often, the price of the tariff is then included into the overall price of the object. Sometimes a finished product is covered by a single tariff when it arrives into a country, like the 25% higher price that you might have to pay on next year's Christmas presents. But sometimes the parts are each charged individually before the final assembly of the finished product. Maybe you're starting to see a little problem here? Yeah, a tariff on each part gets added to the total cost of the airplane, which then have to be paid by someone, and obviously, aircraft are made out of millions of different components.

Disrupting Just-in-Time Logistics and Material Sourcing in Aerospace

But this isn't just about the global sourcing of parts. There is also the question of changing a carefully-choreographed logistical network. Engine components may be flown in by cargo jet and installed already the next day, and landing gear may be assembled in Canada, tested, and then shipped to the US facility just in time to meet production schedules. For decades, manufacturers like Boeing and Airbus as well as car manufacturers before them have implemented something called just-in-time logistics to avoid having stockpiles of parts which increases costs. And any delays anywhere in this chain risks stalling the entire operation, which tariffs will inevitably do. You might actually remember how supply chains shortages from the COVID-19 pandemic had huge knock-on effects for the production of planes and most other things. And if you do, you understand just how delicate these processes can be. Add to this the reality of aerospace-grade materials like titanium, high-strength aluminum alloys, carbon-fiber composites, many of which are mined, processed, or refined overseas, and you're faced with the fact that these materials aren't always even available in the quantities or quality needed from US sources alone. And those that are may not be available at the right price or specifications. Then, of course, there are the machines that actually make the machines. These complicated devices, who are used for things like pressing out metal parts, laying up carbon-fiber and forming metal for turbofan blades, are themselves sometimes imported or made from imported parts. So global trade isn't just a convenience in aviation, it's actually a necessity.

The Counterproductive Nature of Tariffs in Aerospace Manufacturing

Now tariffs are meant to protect domestic manufacturing. But in aerospace they can actually end up doing the complete opposite. So because of how globally interconnected aircraft manufacturing is, tariffs often punish the very companies that they are meant to protect.

Threats to International Sales, Production, and Jobs

And then there is the question of future of new aircraft and how these tariffs might affect them. Boeing jets are sold to almost every country in the world, and in fact, Boeing is the largest exporter in the US by dollar value. Their international orders from airlines are valued in the billions of dollars, and are sometimes even brokered by government executives like presidents or prime ministers. But retaliatory tariffs by other countries can end the chance of these international sales going to Boeing. If Boeing can't sell its jets to China, for example, or Africa or Europe, or can't afford to buy critical parts from overseas, then they will have to scale back production, just as they're finally beginning to address their other problems and maybe even looking to increase the production rate of its 737 MAXes. Simply put, lack of sales to foreign airlines means layoffs, not in China, but in Kansas, South Carolina and Washington state. The same obviously goes for Gulfstream, Spirit Aero Systems, Honeywell and dozens of smaller suppliers who depend on both foreign materials and international export markets, as well as the subcontractors and the sub-contractors below them who make up all of the smaller components. If these tariffs go into effect, all of them will either be forced to raise prices dramatically or make huge cuts and eliminate jobs in order to try and survive the looming drop in demand.

Contractual Complications and the Impact on Long Lead Times

And on top of this, there are also some contractual concerns here. A really big problem in the industry today are the ludicrously long lead times for aircraft deliveries. If you, for example, purchase a new Airbus A321neo today, you would probably only receive it sometimes in 2032 or so. But because airlines pay the bulk of their price at the time of delivery, a company like Boeing might be forced to build a plane at a much higher cost than they agreed to sell it for because of changed costs that happen between the order and the delivery. And tariffs on imported parts that Boeing obviously didn't know about when all of those orders in its backlog came through are such an example of changed costs, even though I personally think that this particular problem might have been included as a possibility in most purchase agreements.

Hindering Innovation and Exacerbating Financial Pressures

Now obviously, trying to respond to these tariffs by building new facilities, switching suppliers and retraining workers will end up costing billions. And that's money that therefore won't be spent on research and development of new products or better safety systems. These additional costs would rock even a financially healthy company, but they would potentially be a body blow to a company like Boeing that is already under substantial financial pressure, as I have discussed in multiple of my previous videos in this channel.

Long-Term Consequences for Aircraft Development and American Influence

Another thing to take into account when we're talking about tariffs is that aircraft design cycles are quite long. If Boeing went for developing a new aircraft, it probably won't fly until at least in the middle of the 2030s, and it likely won't actually enter service until the end of that decade. And if these tariff uncertainties persist then, and customers don't have the confidence to place launch orders, that development could be delayed even further or not come at all. And result of that? Well, fewer American-built jets, less American influence in aviation, and less economic resilience for the country's industry. So very, very bad, and by my view, at least, completely unnecessary.

Airbus's American Presence and Global Supply Chain Vulnerabilities

Then there is Airbus. Yes, of course Airbus is a European company that builds most of its planes over there, and will therefore be affected by the proposed across-the-board tariffs, but what about its American factories? You see, Airbus actually assembles Airbus A320s and Airbus A220s in Mobile, Alabama, mostly for its American customers. This factory employs thousands of American workers, but even though the final assembly happens there, the planes still rely on a global supply chain. The wings for those planes, made in the UK; avionics, some are made in the US, and some in France or Germany; engines, CFM engines are a 50-50% venture between General Electric in the States and Safran in France, but even the all-American Pratt & Whitney engines rely on parts from MTU, which is a German jet engine-maker. So these tariffs will impact those made-in-America Airbuses, almost as much as planes assembled in Europe. And this isn't just affecting big jetliners. Gulfstream, the American maker of business jets based in Savannah, Georgia, also sources part from around the world, and, of course, a significant portion of its production is then ultimately destined for foreign markets. So there's basically just no way to decouple the manufacture of an aircraft from an impossibly complex global supply market, and all this gets much worse when we talk about a truly modern jet like the Boeing 787, for example.

The Boeing 787 Dreamliner: A Testament to Global Manufacturing

This aircraft is currently Boeing's flagship long-haul jet, at least until the 777X enters service, and it is a true marvel of engineering and also a poster child for globalization. When it was designed, the method of global manufacture was as revolutionary as its composite body and its lack of engine bleed air systems. Now the plan was that Boeing would be responsible only for its final assembly, with many aero structures and other parts being shipped in from all over the world. And that obviously also meant that its production is quite vulnerable to any kind of disruption. Here come a few examples of what goes into a typical Boeing 787. The nose section comes from Spirit Aero Systems, Wichita, Kansas, but is made out of imported composite materials. Mitsubishi in Japan makes most of the wing, while smaller wing parts are also made there by Kawasaki, who, on top of that, makes some fuselage sections. The horizontal stabilizer comes from Italy's Leonardo, who also makes the center fuselage, and the engines are either from Rolls-Royce in the UK or General Electric in the US. Avionics are made by Honeywell in the US, or Thales in France as well as others, and the winglets are made by KAA in Korea. The cargo doors are made from Saab in my home country of Sweden, and landing gear components are made in Japan, the UK and France, and it just goes on and on and on like that.

The Painful Financial Math and Risk to Quality

Now just imagine that each of those imported parts had a 10 or a 25% tax on them, or if retaliatory tariffs made it harder for Boeing to export jets to China or Europe. The financial math then becomes painful and even impossible very, very fast. There is also a risk that these costs can't just be absorbed without sacrificing quality. They instead get passed down the chain, making planes more expensive to build and to buy. And the price of these parts isn't just about the raw materials they're made of. It also needs to include the cost of certifying them, and monitoring their compliance with safety regulations. Every major component relies on multinational partnerships, so changing suppliers isn't a matter of making a phone call or setting up a new factory. Instead, it's a matter of regulatory filings, re-certification and multi-year development timelines.

The Unrealistic Prospect of Rapid Domestic Supplier Replacement

Now the response to that might be, just gather everything together and build everything here instead, and again, that is a reasonable goal for all governments worldwide, but because of what I've just said it's not that realistic. Even if Boeing or Airbus wanted to replace every foreign supplier with a domestic firm, they simply couldn't do it overnight, not even if they had five or even more years to do it. And why is that? Well, airplanes aren't like shoes or t-shirts. They require years of design, prototyping and most importantly certification. Every supplier part on an aircraft must meet strict airworthiness standards and be approved by aviation regulators, which means that the requirements placed upon the suppliers are extremely high. So that means that you can't just swap a wing panel made in Japan for one made in Texas. In order to do that you would have to first redesign it, retest it and then get it certified, which obviously will take years and millions of dollars to do. If you then multiply that across each single part, the cost of doing that quickly becomes astronomical, and that's only if there actually exists an available local supplier.

Challenges in Localizing Specialized Components and Labor

You see suppliers invest heavily in specialized tooling and production processes, which aren't easily duplicated. Avionics is a great example of that. They are normally made of very specific and delicate electronic components, many of which only exist in a handful of factories in the world. Remember the chip shortages during COVID-19 that affected everything from handheld game consoles to cars? Well that happened because much of the world's high-end chips are made by a single company, TSMC, based in Taiwan. The United States have tried to replicate this ability, but the factory they're building in Arizona is still years from completion and that's five years after COVID-19 hit. And then there is the labor issue. Even if the US built those factories, who would then staff them? As Boeing found out during the recent production crisis, even training a new aerospace workforce in an existing factory can be quite difficult. And when trained, that labor then isn't very cheap. One of the reasons for the last Boeing strike was that some of their workers wanted, and in my view, really, really needed higher wages, but that also means a higher end price of the components that they're making. So with all of this in mind, tariffs meant to create jobs might ironically drive up costs so high that they instead destroy the need for those jobs in the first place. Beyond that, many of Boeing's suppliers already run on the edge of profitability due to years of cost-cutting and squeezing from the company. So if they lose business due to tariffs or retaliatory trade restrictions, many could just simply close down, which would permanently shrink the supplier base and make recovery even harder.

The Immediate Impact of Tariff Threats: Panic and Disruption

But having said all of this, I guess for most people this can still be a little bit hard to grasp fully, so it might be helpful to game out what these tariffs could do over time if they're left where they currently are. During the first 90 days, as we've seen already, even the threat of tariffs have begun to cause widespread panic. Raw materials become more expensive, suppliers raise prices, some buyers try to fast-track jet deliveries before tariff deadlines, and both Boeing and Airbus are trying to lobby for exemptions. Meanwhile, smaller suppliers get hit immediately. They don't have the cash flow to absorb tariffs, and many are contractually obligated to fixed pricing, so they either eat the cost themselves or risk going out of business. Many of them might not make it past the first few months, and some of them might just start to refuse to sell to American companies altogether. That has actually already started with Pittsburgh-based Howmet announcing that they would be halting all American shipments, using the force majeure clause in their contract citing forces outside of their control. Aircraft lessors and business jet customers have reportedly also rushed deliveries to avoid the tariff risks, and Airbus has already announced that they will be prioritizing delivery of their planes to customers outside of the US, and that US airlines could therefore expect to see delayed deliveries.

One Year Later: Supply Chain Re-evaluation and Competitive Shifts

So that's not great, but let's now go even further and talk about what it might look like a year from now. As tariffs settle in, the damage they cause will then spread further, Boeing and Airbus re-evaluate their supply chains, and Boeing's cost base will increase, and that's especially true on wide bodies like the Boeing 787, making it less competitive with Airbus equivalents. Airbus might divert deliveries away from the US in order to avoid the tariff complications, and then, of course, there is China. China has previously threatened that 34% tariff on US aircraft, and while they haven't fully implemented that rate, the political message is quite clear. If tensions rise, Boeing could be effectively cut off from their most important growth market, just as they were after tensions during the previous Trump government. Over time, that opens the door to Comac, China's domestic jet manufacturer, and the more expensive Boeing jets become, the more incentive Chinese airlines have to buy homegrown alternatives, or just switch over to Airbus. Airbus meanwhile might season this opportunity, and increase its investments in Asia. With a large final assembly line in Tangin, China, and further growing ties to India, Airbus could reinforce its position as the global alternative to Boeing, especially in tariff-hit countries.

A Decade of Tariffs: The Potential Collapse of the Boeing-Airbus Duopoly

Having seen that, let's really jump into the time machine, and imagine this system in 10 years if these tariffs stay in place, or even escalate. In that case, you could see the full collapse of the Boeing-Airbus duopoly as we know it today. Aengus Kelly, who is the CEO of AerCap, the world's largest lessor, said that he believed that these tariffs would reduce Boeing to becoming exclusively a domestic brand, leaving Airbus to dominate Europe, the Middle East, and Asia. China's Comac could then become a serious contender, especially if they continue to localize their supply chain to avoid foreign dependencies, and they could also position themselves effectively to make themselves a good alternative for the growing African markets. And then, of course, we have Embraer, who we've already talked about as a major upcoming player, and they might finally take the plunge and start making larger airliners, and enter new markets in a substantial way as an alternative to Boeing, and as a diversification away from Airbus and Comac. In this type of world, manufacturers will likely localize production in multiple regions, not for efficiency but to avoid tariffs, and this will drive up costs, slow innovation, and effectively shrink the entire market. The US, once the leader in aerospace exports, could find themselves cut off from key buyers, which will mean fewer planes built, fewer exports and fewer American jobs. An Airbus, who have long had a history of working closely with American engineering firms and suppliers, might instead develop new relationships with suppliers in China, Vietnam, and Japan. Even smaller US companies will likely feel the pressure. Some of them, who today are building parts for Embraer or Airbus, will likely lose that business to European or Asian firms, able to produce inside of the tariff-free zones. National and regional supply chains will replace global ones, planes will become more expensive, innovation slows, and the workforce becomes more vulnerable to geopolitical risk.

Conclusion: Aviation as a Global System and the Perils of Tariffs

As you can see, aviation isn't just an engineering industry, it's a global, economic and political system, and these proposed tariffs don't just exist in a vacuum. They are a chess move where everything one country does invites a response from the others, and they create uncertainty and force companies to make painful decisions about where to build, what to buy, and who to hire basically for no reason at all. And having said that, I haven't even started talking about the airlines here, or how all of these changes will likely affect you as a passenger. Anyway, personally, I hope that none of this becomes reality. But I do think that it would be irresponsible to ignore what these changes could really mean. It turns out that there really are no quick and easy solutions to complicated problems. Who would have guessed? But what do you think? Would tariffs help or hurt US aerospace workers? Is it worth paying more to protect domestic manufacturing, or is the system just too global for that to actually work?