U.S. Aviation Industry Urges Trump Administration for Tariff Exemptions Amid Economic Struggles
The U.S. aviation industry is urging the Trump administration to lift tariffs on aircraft and parts, which were previously duty-free under the 1979 Civil Aircraft Agreement. These tariffs, including a 10% duty, are exacerbating financial pressures amid a sector recession marked by declining travel demand and rising costs. Industry leaders, including Southwest Airlines CEO Bob Jordan, highlight the impact on operations and margins. Airlines like Delta and American are scaling back growth plans, while manufacturers like Boeing face significant cost increases. The industry argues that tariff relief is crucial to maintaining competitiveness and supporting U.S. exports.
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04/28 21:31
U.S. Aviation Industry Urges Trump Administration for Tariff Exemptions Amid Economic Struggles
The U.S. aviation industry is urging the Trump administration to lift tariffs on aircraft and parts, which were previously duty-free under the 1979 Civil Aircraft Agreement. These tariffs, including a 10% duty, are exacerbating financial pressures amid a sector recession marked by declining travel demand and rising costs. Industry leaders, including Southwest Airlines CEO Bob Jordan, highlight the impact on operations and margins. Airlines like Delta and American are scaling back growth plans, while manufacturers like Boeing face significant cost increases. The industry argues that tariff relief is crucial to maintaining competitiveness and supporting U.S. exports.
Industry Recession and Demand Collapse
The aviation sector is grappling with a significant contraction in consumer travel spending, driven by concerns over slowing economic growth and persistent inflation. Southwest Airlines CEO Bob Jordan has publicly declared that the industry is already in a recession, citing a dramatic drop in domestic leisure travel not seen since the COVID-19 pandemic. “When consumers are uncertain, they pull back,” Jordan said. “Consumers can immediately stop spending.”
This sentiment is echoed across the industry. Airlines including Delta, American, and Southwest have pulled financial guidance and scaled back planned capacity growth. Alaska Airlines CFO Shane Tackett noted that bookings are increasingly coming in at lower fare levels, forcing carriers to reduce prices to stimulate demand. According to U.S. Labor Department data, airline fares in March saw their steepest month-on-month decline since September 2021.
Tariffs End Decades-Old Duty-Free Status
At the heart of the aviation industry’s lobbying effort is the Trump administration’s decision to impose tariffs on aircraft and parts, effectively ending the duty-free status established under the 1979 Civil Aircraft Agreement. This agreement had allowed the U.S. aviation sector to maintain a $75 billion annual trade surplus and supported a globally integrated supply chain.
The new tariffs, which include a baseline 10% duty on affected imports, have disrupted this ecosystem. Even aircraft assembled in the U.S. are not exempt, as manufacturers rely on imported components. Boeing, for example, is paying 10% tariffs on supplies from Italy and Japan. United Airlines CEO Scott Kirby noted that Airbus is facing tariffs on aircraft assembled in Alabama due to imported parts.
American Airlines CFO Devon May emphasized the financial strain, stating, “It’s just really difficult for us to imagine paying another 10% or something higher than that on airplanes, which are our biggest capital cost.” The company has 14 aircraft scheduled for delivery this year from Airbus and Embraer, many of which are subject to the new tariffs.
Mounting Cost Pressures Across the Supply Chain
The tariff burden is not limited to airlines. Aircraft manufacturers and engine suppliers are also facing significant cost increases. Boeing expects a tariff hit of under $500 million annually, while GE Aerospace and RTX estimate additional costs of over $500 million and $850 million, respectively. These companies have signaled they will not absorb the costs, instead passing them on to customers through price increases.
This has led to growing tension between suppliers and airlines. Carriers are resisting these price hikes, with some considering deferring aircraft deliveries or returning leased planes to manage capital expenditures. “It just doesn’t make economic sense,” May said, referring to the prospect of paying tariffs on new aircraft.
GE Aerospace CEO Larry Culp warned airlines against deferring deliveries, stating, “There are plenty of other people who will step up in line and take their place.” However, with aircraft departures expected to decline in North America—home to 25% of global traffic—airlines are prioritizing cost containment over fleet expansion.
Lobbying for Exemptions
In response to these challenges, aviation industry leaders have held meetings with senior Trump administration officials, including the president himself, to advocate for a reinstatement of the tariff-free regime. The industry argues that its unique position—exporting over $135 billion annually and employing a largely U.S.-based workforce—warrants special consideration.
“Our government affairs team is hard at work on it to make the case as to why there should be a carve-out,” said May. GE Aerospace’s Culp also met with President Trump to explain how the previous duty-free status supported the sector’s strong trade balance. “I have argued that it was good and would be good for the country,” he said.
The White House, for its part, has defended the tariffs as a tool to reduce trade deficits and encourage domestic manufacturing. However, aviation leaders contend that the sector already contributes significantly to U.S. exports and employment, and that the tariffs are undermining its global competitiveness.
Broader Economic Context
The aviation industry’s plea for relief comes amid broader concerns about the economic impact of the Trump administration’s trade policies. Analysts and economists have warned that the tariffs are contributing to a slowdown in business activity and consumer spending. Reuters reports that many economists now see a heightened risk of a global recession, with U.S. tariffs cited as a key factor.
Within the aviation sector, the cumulative effect of tariffs is particularly acute. Airlines are not only paying duties on imported parts but also facing higher prices from suppliers who are passing on their own tariff-related costs. This cascading effect is also impacting Canadian carriers, who must pay tariffs on U.S.-imported parts that have already been taxed once.
