Aviation Industry Braces for 25% Tariff Hike Amid U.S.-EU Trade Tensions

The aviation industry is facing significant disruptions due to the tariff policies implemented by the Trump administration. These policies have led to a collective call from the industry for tariff exemptions, as the ongoing trade tensions between the U.S. and the EU threaten to disrupt the aviation supply chain.

Airbus CEO Guillaume Faury has warned that if the current U.S.-EU trade negotiations do not yield positive results, the EU may impose tariffs on U.S. aircraft. This move could potentially push for higher-level negotiations and bring all parties back to the 1979 agreement, which is beneficial for both the U.S. and European industries. The EU's proposed retaliatory measures are expected to be shared with EU member states as early as May 7 and will undergo a one-month consultation period before the final list is determined.

Currently, the 27 EU countries face a 25% import tariff on steel, aluminum, and automobiles from the U.S. The U.S. also imposes a 10% tariff on almost all other EU goods, which may increase to 20% after the 90-day suspension period of Trump's so-called "reciprocal tariffs." High-level executives in the U.S. aerospace industry have been lobbying the Trump administration to remove these tariffs. In April, Larry Culp, CEO of General Electric, a major supplier to Airbus and Boeing, met with Trump to explain how the "tariff-free system" benefits the aerospace supply chain and brings trade surpluses to the U.S. industry. Culp expressed hope that this information would be conveyed.

Kelly Ortberg, CEO of Boeing, previously stated that in addition to the direct costs caused by tariffs on parts and materials, he is also concerned about the impact of tariffs on Boeing's supply chain and the export capabilities of aircraft manufacturers. The U.S.-EU aviation industry tariff dispute may reignite. Faury mentioned that the 1979 agreement refers to the "Agreement on Trade in Civil Aircraft" signed under the framework of the General Agreement on Tariffs and Trade (GATT), which requires signatories to eliminate import tariffs on related products and regulate non-tariff measures. This agreement was later incorporated into the multilateral agreement system of the World Trade Organization (WTO), and signatories have basically achieved zero tariffs on aviation products.

Despite this, since the 1990s, the U.S. and EU have been involved in a decade-long lawsuit at the WTO over subsidies to each other's aircraft manufacturing industries. After obtaining authorization from the WTO, both sides began imposing tariffs on each other's goods and services as retaliation in 2019 and 2020. By 2021, both sides announced a cooperative framework to resolve the large civil aircraft dispute, suspending related tariffs for five years. Trump's so-called "reciprocal tariffs" mean that the conflict over aircraft tariffs between the two sides may reignite. Faury stated that the retaliatory tariffs the EU may impose will have a greater impact on the U.S. aviation industry than the tariffs imposed by the Trump administration on Airbus. He also stated that companies will face a "lose-lose" situation.

"For Europeans and Americans, this is indeed unfavorable, but more importantly, it is unfavorable for Americans. This is why I hope the situation will eventually be resolved, but currently, it is not," Faury said. "We have a very efficient transatlantic ecosystem, but these tariffs will damage it." The U.S. exports of aerospace and defense products far exceed its imports. In 2023, the global export value of U.S. aerospace and defense products was nearly 136 billion dollars, while the total import value of related products was slightly less than 22 billion dollars. The EU statistics agency reported that in 2024, the EU imported aircraft, spacecraft, and their components worth approximately 18.3 billion euros from the U.S.

Airbus CEO Faury stated during the company's earnings call on April 30 that if the tariffs on European aircraft exported to the U.S. surge, the importing airlines will have to bear the cost. "This is their responsibility," he said. However, several airline executives have warned that they are unwilling to pay tariffs for aircraft. Delta Air Lines CEO Ed Bastian stated that the company will not pay tariffs for any delivered aircraft and will delay receiving them if the tariffs continue. American Airlines CEO Robert Isom stated that the cost of aircraft is already too high, and he will not pay any additional fees. Michael O’Leary, CEO of Ryanair, a major Boeing customer, strongly criticized Trump's tariff policy in a response to a U.S. congressman last week.

Some airlines have already taken strategic measures to avoid tariffs. It is reported that to avoid paying a 10% tariff on a new Airbus A350-900 aircraft, Delta Air Lines chose to fly the aircraft directly from Europe to Tokyo instead of the U.S., and continue to operate it on international routes until it is no longer considered a new aircraft subject to import tariffs before flying to the U.S. In addition to aircraft deliveries, the broader economic impact of tariffs is also troubling airlines. Last month, several U.S. airlines, including Delta Air Lines, Southwest Airlines, and American Airlines, withdrew their full-year performance forecasts, citing uncertainty in the macroeconomy. United Airlines also predicted a significant decline in profits for 2025. American Airlines' Isom stated that the company is taking a "very cautious, even negative" approach to growth, while Chief Financial Officer Devon May stated that Trump's tariffs have exacerbated economic uncertainty, leading to "a noticeable weakening of our main cabin demand." JetBlue Airways President Marty St. George predicted that "demand weakness" will continue.