With the snap of a finger through Executive Orders, the US President imposed varying tariffs against the entire world. The healthy global aviation industry is suddenly under fire, writes Joey Smith of investment banking firm Cassel Salpeter.
The US aviation industry’s performance is approaching all-time highs in 2025, and revenues are projected to surpass $1 trillion for the first time, solidifying the industry’s strongest recovery post-COVID. The aviation industry’s total global economic impact, both direct and indirect, is estimated at more than $4 trillion, while supporting at least 11 million jobs directly and more than 86 million indirectly.
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It would be a shame and reckless to impact this industry and its supply chain. Air transport provides significant economic and social benefits, as it facilitates tourism, trade, and connectivity and enables rapid disaster responses and a lifeline for remote communities worldwide.
The US aviation industry, a shining star and net exporter for the domestic economy, is receiving a raw deal with the Trump tariff agenda. It is a prime example of US manufacturing prowess, offering well-paying jobs and producing one of the largest trade surpluses of any industry for years.
The aircraft, engine, and parts manufacturing industry in the US is expected to export about $125 billion this year, second only to the oil and gas extraction industry, with Boeing being America’s biggest exporter of goods. Approximately 80% of Boeing’s planes are transported to overseas customers. The effects globally and in the US could be far-reaching, from manufacturers and their supply chains, all the way downstream to the flying public.
US Tariffs are shifting - will you react or anticipate?
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By GlobalDataIntroducing tariffs in the aviation sector is an unforced error and is likely to hurt the healthy domestic aviation ecosystem. President Trump’s newly introduced global tariffs represent a “black swan” event with potentially dramatic and unpredictable consequences for the aviation industry and complementary sectors, up and down the supply chain, in the U.S. and abroad.
Specifically, the U.S.-Mexico-Canada Agreement or USMCA, which replaced NAFTA, is on shaky ground, and new North American tariffs could take a significant toll on downstream companies operating within the complex aircraft components supply chain, which has struggled for years with material and labour shortages.
The North American aviation industry is highly interconnected, and the tariffs will impact industry participants both big and small. The notion that new tariffs will drive the movement of production to the United States may be a fallacy. Planes take years to design and manufacture and are typically used for decades; decisions to relocate operations or open new facilities are not made lightly. In addition to high upfront costs, companies looking to expand their US presence will continue to face a skilled worker shortage that has impacted the industry for years.
The dynamic nature of these policies, with exemptions granted and modifications made on short notice, creates substantial uncertainty that further complicates long-term planning. Aircraft transactions typically involve lengthy timelines, and the shifting tariff landscape means that deals struck before the new policies could face unexpected additional costs at closing.
This unpredictability will drive changes in new contract terms, with buyers and sellers needing to carefully allocate tariff risks and develop contingencies for policy changes.
The MRO sector faces new uncertainty, with additional guidance needed from trade officials in the U.S. and abroad. Historically, when US operators brought aircraft or parts to foreign jurisdictions for repairs, no new formal entry or duties were required upon return. However, given that this duty-free treatment was based on the Civil Aircraft Agreement, it is unclear whether such exemptions will continue under the new tariff regime.
Supply chain diversification could accelerate in response to the tariffs. Aviation businesses are reassessing their vendor networks and exploring alternatives in countries less affected by the new duties. This includes potential shifts in parts sourcing, maintenance, and servicing, and even aircraft selection, based on the country of manufacture.
The air cargo industry also faces new headwinds within an evolving tariff landscape. Policy uncertainty, tariff flip-flopping, and exemption jockeying cause distress within the market. Cargo airlines must now navigate a complex landscape of shifting trade flows as manufacturers and retailers modify their supply chains in response to tariff pressures. This will lead to changes in network planning, capacity deployment, and even aircraft acquisition strategies as carriers adapt to new trade routes and volumes.
These tariff challenges and the ripple economic effects are concerning, yet we believe that the US aviation industry and all its downstream sector participants are well-positioned to be proactive, both politically and operationally, to navigate the incoming tariff headwinds. We are hopeful that during these days of uncertainty, the US aviation sector, one of the strongest exporters and employers in the US, will not only weather the storm but emerge stronger and more resilient.
