Aerospace Firms Scour Contracts Over Tariffs After Supplier Challenge

The aerospace industry, a global network of suppliers, manufacturers, and airlines, is grappling with a new challenge: tariffs. The recent declaration by U.S. supplier Howmet Aerospace of a "force majeure event" due to U.S. President Donald Trump's tariffs has sparked a debate over who should bear the cost of these trade disruptions. This move by Howmet, which makes engine parts, fuselage fasteners, and other critical components, has sent shockwaves through the industry, forcing companies to scour their contracts to determine their exposure to these tariffs.



The aerospace supply chain is a delicate web of interdependencies, where a single missing component can halt production. As Jefferies analyst Sheila Kahyaoglu noted, "Howmet has made a chess move, declaring force majeure and threatening to halt shipments. We all know it takes just one nut or bolt to stop the ... supply chain.” This threat underscores the leverage that suppliers hold in this industry, where the cost of disruption can be astronomical.

The tariffs, which include a 20% levy on European Union products such as Airbus planes, are expected to put significant pressure on the industry. The potential for EU retaliation against U.S.-based Boeing adds another layer of complexity. The industry has broadly operated under a 1979 treaty on zero-duty trading in aerospace, but this treaty does not include Mexico, a key player in the supply chain.

The impact of these tariffs is not just financial; it is also operational. The industry is already facing supply chain inefficiencies, workforce disruptions, and inflationary pressures. The tariffs could exacerbate these issues, leading to further delays and increased costs. As Bertrand Grabowski, an aviation adviser, noted, "By definition, aviation is a global market for both buyers and sellers. When you introduce friction like this for such large sums of money, you have instant chaos, not only for airplanes but also for engines and multiple spares from avionics to seats."

The industry is now at a crossroads. Planemakers like Airbus and Boeing hold significant leverage over suppliers, as they control access to next-generation aircraft programs. This leverage could be used to negotiate tariff costs in exchange for participation in these programs. However, this also means that suppliers may have to balance short-term tariff disputes with long-term access to high-value contracts.

The financial and operational risks for aerospace firms are significant. Absorbing tariff costs could lead to margin erosion, cash flow strain, and supply chain disruptions. Firms may be forced to divert funds from production scaling to cover these costs, worsening delays and backlogs. The Airbus A321XLR assembly, for example, could face delays if key components are tariff-affected.

In response to these challenges, firms are likely to prioritize investments in supply chain resiliency and technology-driven cost optimization. Deloitte’s 2025 outlook stresses that firms are prioritizing "resiliency and visibility" in supply chains. This could involve nearshoring or reshoring production, diversifying suppliers, and adopting AI and digital tools to enhance efficiency.

The industry is also likely to see a shift in investment strategies. Firms may pivot investments toward defense contracts, which have steadier funding, away from commercial sectors burdened by tariffs. However, this could also mean delayed innovation and R&D, as cash is diverted to cover tariff costs.

The aerospace industry is at a critical juncture. The tariff disputes are forcing firms to restructure partnerships, diversify supply chains, and accelerate technological innovation. The outcome will likely reshape global aerospace collaboration, with companies prioritizing self-sufficiency and adaptive strategies over traditional reliance on transatlantic partnerships. The industry must navigate these challenges with a keen eye on both short-term costs and long-term strategic investments.