Trump's Tariff Crossroads: How Aircraft and Engine Policies Could Shake Global Markets

The Trump administration’s latest trade maneuver—launching a national security investigation into tariffs on commercial aircraft and engines—has sent shockwaves through global supply chains. Announced in May 2025 under Section 232 of the Trade Expansion Act, the probe targets imports from “a small number of suppliers,” including engines like those made by Rolls-Royce. Yet, just days later, the administration exempted Rolls-Royce from proposed 10% tariffs on U.K. goods, carving out a critical exception to protect U.S. airlines reliant on its engines. This strategic pivot highlights a fraught balancing act: leveraging tariffs to secure supply chain resilience while avoiding disruptions to industries like aviation. For investors, the stakes are high—and the implications are anything but straightforward.

The Exemption That Could Save Airlines—and Cost Investors

The Rolls-Royce exemption, announced May 8, 2025, underscores how geopolitical trade deals now hinge on real-world operational needs. U.S. airlines like Delta Air Lines, which operates 80 Rolls-Royce-powered Airbus A350s, faced potential chaos if tariffs spiked the cost of engine maintenance or replacements. Commerce Secretary Howard Lutnick framed the exemption as “critical to preserving supply chain stability,” but the move also signals a broader strategy: shielding key sectors while pressuring others.

For investors, this creates a stark divide. Companies like Rolls-Royce (LSE: RR.L) and Boeing (NYSE: BA)—which relies on Rolls engines for its 777X and 787 models—avoided immediate financial blows. Yet peers like General Electric (NYSE: GE), which competes in the aircraft engine market, might gain an edge if tariffs deter European rivals. Meanwhile, the U.S.-U.K. trade deal, reducing automotive tariffs but leaving aerospace unresolved, leaves lingering uncertainty.

Boeing vs. Airbus: A Tariff-Tainted Rivalry

The investigation’s focus on aircraft imports raises the specter of trade wars reigniting. Boeing and Airbus, locked in a decades-long rivalry, now face new pressures. If tariffs materialize, airlines may delay orders, squeezing both manufacturers. Airbus, which relies heavily on U.S. parts, could see costs rise if tariffs hit its supply chain. Boeing, meanwhile, might suffer if European governments retaliate with their own tariffs.

The 2018–2019 Boeing-Airbus subsidy dispute, resolved in 2020, offers a cautionary tale. During that period, Boeing’s stock fell 20%, while Airbus’s order backlog shrank by 30%. Today’s stakes are higher: a 10% tariff on engines alone could add $10 million to the cost of a single A350 aircraft, potentially pricing it out of reach for some buyers.

The China Factor: A Tariff ‘Wild Card’

While the U.S.-U.K. deal eases some tensions, the shadow of China looms larger. The administration maintains 145% tariffs on Chinese imports—a relic of the 2018 trade war—though talks to reduce them continue. If those tariffs ease, Chinese manufacturers like COMAC could gain ground against Boeing and Airbus. Conversely, a hardline stance could push China to retaliate, hitting U.S. exports in sectors from semiconductors to agriculture.

Investors must also parse the Commerce Department’s ongoing probe. A final determination on tariffs could come by late 2025, but delays are likely. In the meantime, companies exposed to aerospace supply chains—like Honeywell (NYSE: HON) or Spirit AeroSystems (NYSE: SPR)—face volatility.

The Bottom Line: Navigating the Tariff Tightrope

The administration’s dual-track approach—tariffs as leverage, exemptions as safety valves—reveals a calculated risk. For investors, the path forward demands scrutiny of three key factors:

1. Geopolitical Leverage: The U.S. is using tariffs to force allies (like the U.K.) and adversaries (like China) into trade concessions. Rolls-Royce’s exemption shows how critical infrastructure sectors get priority.
2. Supply Chain Resilience: Airlines and manufacturers must adapt. Delta’s reliance on Rolls engines highlights how just-in-time supply chains are now vulnerable to policy shifts.
3. Market Sentiment: The S&P 500 (NYSE: SPY) has dipped 3% amid trade jitters this year, but aerospace stocks have underperformed by 8%. A resolution—one way or another—could spark volatility.

In the end, Trump’s tariffs are less about economics and more about geopolitical chess. For investors, the lesson is clear: bet on companies with diversified supply chains, watch for tariff exemptions as de facto trade policy, and brace for volatility. The sky may be the limit for some—but for others, it’s where the next trade war will be fought.

Conclusion: The U.S. aerospace sector is at a crossroads. With tariffs threatening to disrupt a $100 billion industry and exemptions carving out winners like Rolls-Royce, investors must prioritize flexibility. Boeing and Airbus face a precarious balancing act: adapt to tariff pressures or risk losing market share to rivals in a post-pandemic recovery. Meanwhile, the 10% U.K. tariff baseline and 145% Chinese tariffs loom as wildcards, with no clear timeline for resolution. For now, the safest bets are companies with global supply chains and the agility to pivot—because in the aerospace game, there’s no landing without planning for turbulence.