Tariffs are a major concern for the aviation maintenance industry. The fact that the world relies on a few major brands of airliners, and that airlines frequently use MROs outside of their national boundaries, means that tariffs are going to pile up costs for MROs and their clients worldwide.
It is for this reason that Aviation Maintenance magazine is confronting the issue of tariffs head-on, with the help of two aviation industry experts. They are Jason Dickstein, general counsel with the Aviation Suppliers Association (ASA): and Christian Klein, executive vice president of the Aeronautical Repair Station Association (ARSA).
The Industry Is Not a Fan of Tariffs
Based on what the experts told us, the entire aerospace industry (of which aviation maintenance is a subset) is not a fan of tariffs.
The reason? Any tariffs that the United States imposes on other countries would be very quickly reciprocated by those countries — especially Canada and Mexico, who are two of America’s largest trading partners. This fact leaves the US aerospace and defense industry extremely vulnerable to retaliatory tariffs, given that this industry’s exports rose by 21 percent from 2022 to 2023, for a total value of $135.9 billion. (Source: Aerospace Industries Association.)
Aviation Suppliers Association
As for the notion that tariffs on imported products such as steel will benefit domestic producers? Well, that has proven to be the case, but not necessarily in a way that increases production and jobs in the U.S. “Historically, when we imposed the 25% tariff on Chinese steel in 2018, U.S. steel companies raised their prices to match the cost of tariffed foreign steel, because they saw it as an opportunity to increase their profits,” Dickstein said. “So there is definitely a fear that even those that are already buying American steel will get caught in the crossfire of any additional tariffs and find that their costs will increase again, even though they’re already doing what the tariffs appear to be intended to do — that is to say, buying American.”
“I know the official statement has been that — and this is even stated in the Executive Orders — the Trump administration wants this to be an opportunity for the U.S. steel and aluminum industries to develop new infrastructure to produce more and take the place of foreign suppliers,” added Dickstein. “But that wasn’t what happened when we imposed tariffs seven years ago. So I think there’s a lot of fear that that’s not going to be what happens this time around.”
So, based on past U.S. experience with imported steel, there’s no motivation for domestic producers to actually invest in increased infrastructure once tariffs have been imposed. In fact, the opposite is true: the availability of tariffed imported steel (and aluminum) simply provides a pricing benchmark for domestic producers to match and profit from. That is what they have done in the past when presented with this kind of tariff scenario, and what economic logic will compel them to do again.
After all, these actions make sense. Why would any company spend billions investing in new infrastructure that won’t earn money for years to come, when it can reliably boost revenues now and keep Wall Street happy by simply matching the prices of tariffed imports? What CEO whose job security relies on increasing profits and satisfying shareholders would do otherwise?
Aeronautical Repair Station Association
As for ARSA’s take on tariffs? “It is important to state first and foremost that ARSA does not specialize in international trade issues from an economic tariff standpoint,” Klein said. “Instead, we’re very focused on the potential non-tariff impacts on the industry, and our overriding philosophy to help ARSA’s members and clients attain the highest level of safety with the highest level of efficiency. To the extent that the government is imposing anything like tariffs that undermines efficiency, it’s not a good thing for the industry writ large because the maintenance industry is obviously an inherently global industry.”
“One very interesting statistic I came across that gives you a sense of how integrated the aviation maintenance sector is globally,” he added, “[is that] The United States exports almost $26 billion worth of aircraft parts annually and imports $15.3 billion. In both these areas, we lead the world, with a third of all global exports and a fifth of imports. This tells you that we’re critically connected to the global market for key aviation articles. There are people outside the United States that need the things we’re producing and we are in the United States desperate for things that people outside the United States are producing.”
An Already Battered Supply Chain
The possibility of tariffs hitting the aerospace industry in general, and the aviation maintenance industry in particular, is bad news for a supply chain that has still not recovered from COVID 19. Years after the pandemic has passed, parts are still in short supply, deliveries are delayed for months and in some cases even years, and prices remain high.
These facts account for Jason Dickstein’s fatalistic response to the question of how tariffs would affect the supply chain. “It’s hard to say what the damage will be,” he said. “The supply chain has already been adversely affected, and at this point in time, things are bad enough that I’m not sure tariffs will make it any worse. It’s sort of like you’ve been beaten down and now that you’ve been beaten down, if they rain some more punches on you, it doesn’t matter.”
Clearly, tariffs would negatively affect the supply chain for these non-U.S. customers, with subsequently higher prices cutting into some companies’ export sales as well. Faced with these higher prices, these non-U.S. customers might look closer to home for the helicopters and components that they need to support flying. As a result, tariffs might open the door for other aircraft competition, and motivate some non-U.S. customers to turn away from manned aircraft altogether and create a push towards drones made by China or any other non-U.S. manufacturer.
Unintended Consequences
To reiterate: The stated purpose of the proposed Trump tariffs is to boost domestic production. However, their imposition could hurt the U.S. aerospace industry through the imposition of reciprocal tariffs — and it could lead to unintended consequences that could shift the balance of the global aviation market.
Just how far these unintended consequences could go was alluded to in a story supplied by Jason Dickstein. He attended a conference in China a decade ago, where China Eastern Airlines was announced as the launch customer for the Chinese designed-and-built Comac C919 narrow-body airliner. “When the speaker from China Eastern said that they were looking forward to the day when they no longer had to buy foreign aircraft, the entire room — which was 99% Chinese — leapt up into applause,” Dickstein recalled. “The Chinese are just as patriotic as Americans are. If we make it difficult for China to economically use Boeing aircraft, we’re simply encouraging them to adopt the C919 and other domestically made aircraft.”
The same is true for countries that do not produce their own aircraft and rely on countries such as the U.S. to supply them. China has already proven its ability to match and even surpass the United States in sophisticated technology markets such as electric vehicles. Starting a trade war that makes Boeing airliners more expensive to buy and maintain internationally will only motivate non-U.S. customers to look elsewhere for aircraft.
To underline this point, Dickstein turned to the global satellite market. “At one point in time, the United States manufactured over 95% of all satellites, and we protected the technology,” he said. “And since we told other countries we wouldn’t sell them satellites, they simply developed the domestic technologies independently and it cut the U.S. sales by half because suddenly we had new competitors. So I think that it is correct to assume that other market players may take advantage of an opportunity to sidestep the U.S. trade war by creating deals between non-U.S. companies and non-U.S. countries.”
Returning to the MRO market, Jason Dickstein wonders what will happen when a major carrier such as Air Canada is faced with tariffs for using U.S. MROs, and then is offered a better deal elsewhere. “For example, China has significant MRO capabilities,” he said. “If China goes to Canada and says, ‘Hey, we’re your friends, we’re not going to impose tariffs on that sort of activity’, and Canada reciprocates with, ‘Well, then we’re not going to impose tariffs either’, that gets us to a point where China becomes more attractive to a Canadian company than the U.S. is when it comes to sending MRO activity.”
But could matters actually get this bad? Christian Klein is not sure. “I don’t have a good answer for you,” he told Aviation Maintenance. “I think a lot of it is yet to be seen because we don’t even know exactly what the administration’s going to do and what countries are going to get tariffs. We obviously heard the initial offer, if you will, but we don’t know where that’s going to go.”
A Hit on PMA Parts?
One area where U.S. aviation manufacturers have led the world is in the creation of PMA (Parts Manufacturer Approval) parts. As the FAA website explains, its PMA approval process “allows a manufacturer to produce and sell these articles for installation on type certificated products.” This means that third-party manufacturers can make replacement PMA parts for OEM aircraft that are as safe and reliable to use as the originals. (Some PMA parts are even better than the originals!)
Adding tariffs to the PMA parts equation could hurt U.S. PMA manufacturers on the global market. Not only will it be more expensive for non-U.S. airlines and MROs to buy U.S.-made PMA parts, but this price differential may encourage the further development of PMA parts manufacturing in non-U.S. countries. “When you’ve got a non-U.S. OEM and a U.S. competitor manufacturing under PMA or TSOA (Technical Standard Order Authorizations), those U.S. companies that are filling the gap in the supply chain are going to find themselves at a weird competitive disadvantage because of reciprocal tariffs imposed on them by foreign countries,” said Dickstein.
What Can Be Done?
It seems safe to say that tariffs will be bad news for the global aerospace industry. In fact, there is data from the 2016 Trump administration to prove that tariffs will only serve the government and CEOs.
According to that data, as cited by Jason Dickstein, tariffs went directly to the U.S. government, allowing it to offset tax cuts to the wealthiest Americans to some degree. But the damaging thing for the U.S. economy and American jobs was that U.S. manufacturers boosted their profits by raising prices to match those of tariffed imports. There was no incentive for these companies to invest in new facilities or hire more employees. This is the false promise: that tariffs will encourage American companies to reinvest in the American economy. It was true during the 2016-2020 Trump term, and it will be true during this term.
The bottom line is tariffs do not encourage American companies to invest in American labor. Doing so would cost more than manufacturing offshore — and that’s not what their investors or Wall Street wants.
Given these proven facts, what can MROs and other companies in the aviation maintenance space do to mitigate this problem?
“It’s like any other sort of risk analysis,” replied Klein. “You figure out what you’ve got coming in and where it’s coming from, figure out how significant the geopolitical risk is associated with what you’re getting from where, and then start looking for alternative sources.”
“For instance, if you think that Canada’s going to impose a tariff on U.S. aircraft parts, then it may make sense to try and start warehousing parts in Montreal today,” Dickstein said. “But that’s a short-term solution. It is not possible to stockpile enough parts to cover you for the next four years. So if you disagree with the tariffs as they’re being applied, especially bearing in mind that reciprocal tariffs are planned, then it might make sense to communicate with your elected representatives.
“The President’s tariff authority is delegated to him by Congress,” he added. “So, in theory, Congress could actually put limits on it or could negotiate with the White House on foreign policy approaches that make a little more sense. That said, I’m not sure in the current environment if even that would be effective.”
The bottom line: If implemented, U.S. tariffs could start a chain of events that would only benefit the U.S. Treasury and U.S. producers of tariffed goods. Everybody else would lose, including the U.S. aerospace industry. The facts from the last round of tariffs bear this conclusion out.