It’s an uncertain world out there. Marc Latman, partner in Smith, Gambrell & Russell’s Global Transportation Practice, answers some questions on the impact of tariffs on the aviation industry
Q: How are tariffs affecting the commercial aircraft industry overall?
A: The impact of tariffs on aircraft really depends on the airline’s location, their taking of new delivery aircraft from a manufacturer, where the aircraft is manufactured, and where the parts are sourced. It’s a global jigsaw puzzle—and tariffs disrupt that entire supply chain.
Q: Which airlines are most vulnerable right now?
A: Chinese airlines with existing U.S.-manufactured aircraft orders are among the most exposed. With steep tariffs flying in both directions, taking delivery under existing contracts becomes more costly—and new orders may stall.
Q: Are U.S. airlines better positioned because they buy Boeing aircraft?
A: U.S. airlines with Boeing orders are presumably in a better position than U.S. airlines with Airbus or Embraer orders, but that doesn’t mean they’re immune. If parts come from China or other tariff-targeted countries, costs still rise.
Q: What about Airbus orders? Are they affected by U.S. tariffs?
A: U.S. airlines with Airbus orders may be able to lessen the tariff exposure if their aircraft are assembled in Airbus’s Mobile, Alabama factory. Airbus opened its Mobile, Alabama plant a few years back in part to reduce the impact of WTO-sanctioned U.S. tariffs on EU-manufactured parts by shifting final production stateside. While many aircraft parts still come from Europe or Asia and may be subject to tariffs, assembling the planes in Alabama helps U.S. carriers avoid or reduce tariffs on fully built aircraft, offering a key buffer in turbulent trade environments.
Q: Has the industry dealt with something like this before?
A: Back in 2019, the WTO allowed the U.S. to impose tariffs on European products, and the U.S. targeted Airbus aircraft. In response, Airbus and several U.S. airlines shifted final assembly to Alabama to reduce tariff exposure. While that dispute was resolved in 2021 and the tariffs were lifted, it created a playbook that airlines are likely revisiting now as trade tensions rise again.
Q: Who ends up paying the added cost from tariffs—the airlines or the manufacturers?
A: Aircraft purchase agreements often include price escalation clauses, which allow the price of an aircraft to rise if manufacturing costs increase over time—including due to tariffs. But not all contracts offer the same level of protection. Some airlines have negotiated cost-sharing arrangements or escalation caps to help limit their exposure, while others have not. Even with favourable terms, buyers are still likely to face higher costs in a tariff-heavy environment.
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