Aviation groups are breathing a collective sigh of relief as trade wars with Canada and Mexico were averted, at least for the next 30 days. President Donald Trump announced Monday that he was postponing the imposition of 25 percent tariffs on goods imported from both countries in return for assurances both countries would improve border security against drug smuggling and illegal immigration. As with many industries, the tariffs would have had a major impact on aviation. Canada has several airframers, including Bombardier and De Havilland Canada, and also produces myriad parts, including hundreds of engines, for OEMs. Mexico also makes parts and subassemblies for new aircraft.
Tariffs have a lot of differing effects in both scope and magnitude. One of the long term benefits is the bringing back of manufacturing into the United States. Employment, national security, positive inflow of cash into the U.S. would be staggering if allowed to happen. For the last fifty years the U.S. has been shipping manufacturing overseas all in the name lower prices and profits. It’s pretty obvious the damage that has been done to the U.S. over the years. It’s time for a change if you want the change and everything that comes with it. If not, then you live with the status quo. You’ll get your cheap prices. You’ll also get the fallout that comes with it.
So the alternative is to artificially increase the prices of items by introducing tariffs.
Why don’t we just instead set minimum prices no matter where they’re produced and force the manufacturers to pay a living wage to manufracture iPhones, Chevy volts,garden tractors, waste baskets, etc., in America
This is what tariffs are trying to accomplish. But it’s a complicated problem and throwing a simple solution at the problem won’t fix it.
What it would mean for American customers of a Canadian AMO needing parts or aircraft inspections, overhauls and repairs.
Typically, U.S. articles repaired abroad and then returned to the United States (or articles for which a duty was previously paid that are subsequently sent to Canada for repair) are charged a duty based on the added value associated with the repair. This added value is typically equal to the cost of the repair (unless it is a no-charge repair, in which case it is based on the fair market value fo the repair). This is covered under chapter 98 tariff subheadings like 9802.00.40 (for warranty repairs) or 9802.00.50 (for non-warranty repairs). The goods would be subject to a basic duty based on the repair value times the rate that applies to the underlying good. For example, if the repair cost was $20,000 and the underlying aircraft part was subject to heading 8807, then the rate of duty would be zero percent so the duty would be zero dollars. Under the new tariffs, though, if the repair cost was $20,000 and the tariff is at a 25% rate, then the U.S. importer to whom the repaired part is returned (from Canada) would need to pay an import duty of $5,000. This requirement appears to be suspended with the remainder of the Canadian tariff, but if the Canadian tariffs go into effect in March, then the application to repairs will still apply.
Having parts built in America sounds good - on paper BUT many OEMs and aftermarket companies buy hundreds of engines built by Pratt &Whitney Canada.
These engines cost upwards of a million dollars or more - each on the low side. So add $250,000 per engine raises the price to $2.5 million per airplane. Pratt builds these engines using mostly parts manufactured IN THE US ALREADY. They simply assemble them in Canada or Europe. Some of the raw materials come from Canada OR China to the US, the parts are built in the US, then sent to Canada for assembly then back to the US for final installation. Some (many) of these planes are sold back into Canada.
So now you would have a tariff on the raw materials from Canada and China even at 10% adds millions to the costs, then you have a 25% import duty from Canada on the parts manufactured in the US and sent to Canada for assembly, then another 25% duty on the engines coming back to the US, then another 25% if its sold to a Canadian customer. If you think this won’t affect the common US citizen other than losing a $75-100,000 a year job? Think again. The airlines parts price would double or triple. They won’t take the hit - the US customers will. How about $5,000 for a coach ticket from Dallas to St Louis?
Pretty sure the business aircraft market would grind to a halt. Of course European manufacturers would be elated about this. They won’t have these onerous tariffs so they can undersell US manufacturers by upwards of 100%. I know where I’d be buying my parts from. Sure won’t be from US companies.
To get a US company up and running to do what Pratt Canada does would take a decade or more provided they could find the workers, get them trained and get the FAA to improve it’s certification timeline by at least 200%. By then the damage is done. US OEMs would have already closed shop or at least turned to Rolls Royce or some other European company for their engines.
Honeywell is the only US turbine engine company and they build a lot of their parts in Canada and Mexico as well as Europe so that isn’t the answer either.
Aviation parts are a global economic engine, to think we can simply flip a switch and bring all engine and parts manufacturing into the US is naive to say the least.
I am confident that this is just a Trump negotiating tactic that will have some amount of success, but I strongly doubt Trump will be willing to kill off an entire multi-billion dollar industry that pays far better than most industries out there, no matter how many illegals they think they can stop. Kind of like cutting off your arm because you sprained your wrist.
Bringing back jobs to Americans is only half the story, you refer to the cheap imports that cost American jobs. But when fair trade agreements are struck, there are also enormous Exports from America that are also created and these exports create American jobs. You didn’t mention that. The trick is the get balanced trade, so both countries benefit from larger markets.
More destructive theater from our chief executive. Crisis averted by Prime Minister Trudeau and President Sheinbaum agreeing to do what they were already doing. Meanwhile aviation and other markets are roiling.
I’m sorry. If you walk into a bodega, brandish a gun, and say “Gimme that bottle of liquor!”, then, when the shopkeeper pulls out his own gun and points it at you, you don’t get to say, “Ha-Ha, I was only kidding.” The cops are on the way, and normally, you’re going to jail.
To bad American politics are no where near normal these days.
Tariffs are bad business and hurt the guy at the bottom of the food chain. I shook my head during trump’s first run - telling workers in Cleveland he’s going to bring their jobs back. Back from somewhere they pay 5$ an hour without benefits to unionized Amurika at 35$ an hour plus health care. Great if everyone in the US is willing to buy an 80k$ entry level car.
Meanwhile on topic, the US has a great aviation industry in all aspects; Canada is no threat and I’m betting is a net importer.