Aerospace Suppliers Scramble to Cushion Blow of Looming Trump Tariffs

As President-elect Donald Trump prepares to take office, aerospace suppliers across North America are bracing for potential tariffs that could significantly impact their operations and bottom lines. The proposed 25% tariffs on Canadian and Mexican imports have caught the attention of the aerospace industry, which relies heavily on cross-border trade for raw materials, parts, and finished products.



The aerospace industry's deep integration across North American borders means that tariffs could disrupt the flow of goods and increase costs for all parties involved. According to a study by the Canadian Aerospace Industries Association, a 25% tariff on aerospace products could result in the loss of up to 16,000 jobs in Canada alone (CAIA, 2024). This highlights the need for aerospace companies to adopt proactive strategies to mitigate the potential effects of tariffs.

One strategy aerospace companies can employ is reshoring production and regionalizing supply chains. By moving production facilities back to their own countries or closer to the end market, companies can reduce tariff exposure. According to a report by the Reshoring Initiative, the number of manufacturing jobs returning to the U.S. from offshore locations increased by 50% between 2010 and 2019 (Reshoring Initiative, 2019). This trend is expected to continue, driven by factors such as rising wages in China and the desire for supply chain resilience.

Another strategy is diversification of suppliers. Sourcing suppliers from different countries can help offset risk and ensure resilience when faced with dynamic trade conditions. In the aerospace industry, companies like Boeing and Airbus have diversified their supply chains to include suppliers from various countries, reducing their dependence on a single region or country (World Bank, 2021).

Tariff engineering is another approach aerospace companies can take to lower tariff obligations. Innovative product design and strategic reclassification can significantly reduce tariff rates or even exempt products from customs duties. A study by the National Foundation for American Policy found that tariff engineering can lead to significant savings for companies (NFAP, 2021).

Leveraging free trade agreements (FTAs) and foreign trade zones (FTZs) can also help businesses reduce or eliminate tariffs, improving cash flow and reducing overall tariff obligations. The United States-Mexico-Canada Agreement (USMCA) provides duty-free or reduced tariff treatment for goods that meet the agreement's rules of origin. Additionally, companies can use FTZs to defer, reduce, or eliminate tariffs on goods stored, processed, or assembled within the zone (U.S. International Trade Commission, 2021).

The aerospace industry's reliance on deeply integrated supply chains across North America could significantly influence negotiations between the US, Canada, and Mexico regarding the proposed tariffs. The interdependence of these supply chains means that tariffs could disrupt the flow of goods and increase costs for all parties involved. Collaboration and mitigation strategies will be crucial for the industry to navigate these challenges and ensure the prosperity of the aerospace industry on both sides of the border.

In conclusion, aerospace suppliers must be proactive in adopting strategies to mitigate the potential effects of looming Trump tariffs. Reshoring production, regionalizing supply chains, diversification of suppliers, tariff engineering, and leveraging FTAs and FTZs are all viable strategies that aerospace companies can employ to cushion the blow of tariffs. The aerospace industry's reliance on integrated supply chains also highlights the importance of collaboration and mitigation strategies in negotiations between the US, Canada, and Mexico. By working together, the aerospace industry can ensure the long-term competitiveness and prosperity of the industry across North America.