As the U.S. prepares to enact reciprocal tariffs on trading partners on April 2, Canadian aerospace trade groups are warning of potential cost increases on items ranging from aircraft components to engine repairs. The trade war, which has already resulted in 25 percent tariffs on steel and aluminum imports to the U.S., has sparked retaliation from Canada. While some sector-specific goods may be excluded from the tariffs, Canada is considering retaliatory tariffs on $87.31 billion of U.S. goods. Aerospace companies in both countries are concerned about being squeezed by duties from both the U.S. and Canada, fearing a rise in costs, loss of productivity, and a loss of competitiveness.
The aerospace industry contributes nearly $29 billion to the Canadian GDP. Finding counter-tariffs that target the U.S. without harming domestic industries is a challenge. Despite the close integration of supply chains between the two countries, aerospace has not been heavily impacted due to long lead times on purchases and compliance with the USMCA trade deal negotiated during the previous Trump administration. The Canadian government is working to mitigate the impact of countermeasures on Canadian workers and businesses, while also considering requests for exceptional relief to help alleviate the strain of the escalating tariffs.
While existing tariffs on aluminum and steel have had minimal impact on Canadian business jet maker Bombardier, the industry is bracing for potential cost increases due to tariffs on engine maintenance. The Aerospace Industries Association of Canada warns that existing tariffs, combined with fresh duties, could raise costs on engine maintenance in North America. This could have a significant impact at a time when space at Maintenance, Repair, and Overhaul shops in both countries is already constrained by demand. AIAC CEO Mike Mueller emphasized that the tariffs will provide additional costs for MRO providers in both Canada and the U.S. and will impact cross-border supply chains.
The European Union recently delayed tariffs on U.S. bourbon, wine, and toilet paper after Trump threatened 200 percent duties on European spirits. Canadian Prime Minister Mark Carney has acknowledged the limitations of dollar-for-dollar retaliation given Canada’s smaller economy. The government is taking steps to mitigate the impact of countermeasures on Canadian workers and businesses, with a focus on finding a balance between retaliating against the U.S. and protecting domestic industries. While the industry remains resilient for now, the potential for increased costs and disruptions in the supply chain is a growing concern for aerospace companies in both countries.
The trade dispute comes at a critical time for the aerospace industry, with companies in both Canada and the U.S. bracing for the potential impact of escalating tariffs. Melanie Lussier, president of Aero Montreal, warned that the proposed counter tariffs could be catastrophic for both countries, resulting in higher costs and decreased competitiveness. Despite efforts to negotiate exemptions or removal of certain U.S. products from the list, the industry is preparing for a challenging road ahead. As companies gather for an industry supply chain summit in Montreal, the focus will be on finding strategies to navigate the impact of the tariffs while maintaining productivity and competitiveness in the face of uncertainty.
