The USA will enact steep tariffs against neighbours Canada and Mexico starting in March.
US President Donald Trump on 27 February affirmed his intention to raise import duties on the two key trade partners starting on 4 March, after previously delaying the punitive measures.
Trump cited narcotics such as illegally produced fentanyl “pouring into our country” as his justification for the move, which will see a 25% tax on cross-border trade with Canada and Mexico – both of which have previously vowed retaliation.
“Until it stops or is seriously limited, the proposed tariffs scheduled to go into effect on [4 March] will, indeed, go into effect as scheduled,” the president said on his Truth Social platform.
The White House also plans an additional 10% duty on imports from China, adding to the 10% tariff enacted on Chinese products and materials in January.
Trump had previously said the taxes would take effect at the start of February, but deferred for a month following emergency talks with his counterparts in Ottawa and Mexico City over measures to combat drug smuggling.
The additional costs come as important players in the aerospace industry like Boeing have only recently stabilised supply chains that were thrown into chaos by the Covid-19 pandemic. The airframer is currently pushing to increase 737 Max production to the level of 38 jets per month.
The North American manufacturing economy is highly integrated across the three countries, with parts and components often crossing a border multiple times before final assembly. Such practices began in the 1990s under the North American Free Trade Agreement, with the ties deepening under the 2019 US Mexico Canada trade agreement – which Donald Trump signed during his first term in the White House.
“The 25% tariff, if it comes into effect, will… dramatically affect the aerospace [and] aircraft industry because of the supply chains that take parts and components back and forth across the border,” says Gary Hufbauer, fellow at US non-profit research group Peterson Institute for International Economics.
Canadian companies in particular stand to be significantly impacted by the American tariffs, with Ottawa’s aerospace industry heavily on sales of aircraft and components to US buyers.
“Proposed tariffs that could have a broad impact are clearly a concern for all companies who participate in a global economy and supply chain,” Quebec-headquartered business jet maker Bombardier said in December.
Airframer De Havilland Canada also relies significantly on sales to US customers, while other Canadian firms supply parts to major US-based manufacturers. American rotorcraft manufacturer Bell assembles all of its civil helicopters in Mirabel, Quebec.
“The imposition of 25% tariffs would have significant repercussions on the entire aerospace ecosystem, both here in Quebec and globally,” says trade group Aero Montreal. “Our industry relies on deeply integrated supply chains that transcend borders. While this threat is concerning, it is also an opportunity to demonstrate the strength of our collaboration with governments and international partners.”
There is the possibility that aerospace components could receive a carve out from the new import duties, or that manufacturers could find a way to avoid them.
Bombardier notes that the “majority” of materials found on its aircraft actually originate from suppliers within the USA.
“On top of this, we directly manufacture a variety of components in multiple states,” the airframer notes. “These activities, multiplied across our industry, contribute to sustaining tens of thousands of high-value jobs in the US as well as tens of thousands in Canada.”
Mexico also stands to take a hit, with that country’s aerospace sector now producing components for major US firms. Many of the largest players in American manufacturing have moved some component production to Mexico in recent decades, seeking lower labour costs.
Those parts are then shipped north for assembly into finished products.
Although less integrated than Canada and Mexico, China conducts huge volumes of trade with the USA, representing Washington’s third-largest trade partner after its North American neighbours.
While previous Trump tariffs and tensions over Taiwan have blunted that relationship in recent years, the USA and China still exchange hundreds of billions of dollars’ worth of goods and services every year. In December alone, the two countries conducted some $50 billion in trade, according to the US Census Bureau – just over 11% of Washington’s total for the month.
Revisiting the trade war that began during Trump’s first term and was escalated by his successor Joe Biden will likely prompt a response from Beijing – one that may hit the American aerospace sector.
Ahead of the 2024 presidential election, industrial analyst Richard Aboulafia with AeroDynamic Advisory told FlightGlobal the implementing of tariffs promised by candidate Trump could result in the “end of the China civilian aircraft market for the US”, if Beijing looks for a way to retaliate.
China only resumed accepting new 737 Max deliveries from Boeing in 2024, after a nearly five-year hiatus tied to the type’s grounding in 2019 after multiple fatal crashes.
“These things have a way of spiralling out of control,” Aboulafia said of the trade tit-for-tat.
European airframer Airbus may prove more resilient than its American rival. The company already completes assembly of the A220 type and A320neo-family aircraft in Mobile, Alabama, although it does import components to support that work.
Airbus chief executive Guillaume Faury in October noted the company has prior experience navigating prior US-European trade wars, including years-long disputes over alleged aircraft-production subsidies adjudicated by the World Trade Organization.
The company may yet have need of that expertise. Trump on 26 February threatened a 25% tariff on goods coming from the European Union. The following day he reaffirmed Washington plans to enact reciprocal tariffs on 2 April targeting any countries judged to have trade restrictions on American products.
White House trade advisers reportedly consider the value added taxes levied by European governments to be a form of tariff.
Kevin Hassett, the top White House economic adviser, on 27 February told the US television network CNBC that Trump will determine new tariffs after a study is completed by 1 April.
“There’s a study coming out on [1 April], and after that the president is going to decide what to do about tariff policies for all countries,” he said.
Another major unknown is how trade in defence products will be impacted. Canada has significant outstanding orders with US defence manufacturers, including billions of dollars’ worth of aircraft from Lockheed Martin, Boeing and General Atomics.
“We are carefully evaluating the announcement and will work with our suppliers to address any potential impacts,” Lockheed tells FlightGlobal.
The airframer expects to begin delivering the first of Canada’s 88 F-35s in 2026 under a 2023 agreement valued at $14.2 billion. Ottawa has already begun developing infrastructure to support the planned fleet, including a new quick reaction air base and launching a search for a new jet trainer.
Also potentially impacted is the Royal Canadian Air Force’s $10.4 billion procurement of up to 16 P-8A Poseidon maritime patrol aircraft from Boeing under a 2024 contract.
A Boeing official not authorised to speak publicly on the matter says the company is monitoring the potential imposition of tariffs on products crossing the US-Canada border.
California-based General Atomics has an outstanding order with Ottawa covering 11 MQ-9B SkyGuardian remotely piloted aircraft, a deal valued at some $2 billion. Deliveries on that fleet are expected to begin in 2028.
“It’s too soon to tell what kind of effects any changes in tariffs would have, and I don’t want to speculate on what might or might not happen,” says the company’s senior director of strategic communications C. Mark Brinkley.
“We must constantly evaluate and re-evaluate our business operations based on evolving conditions, whether those are regulatory, policy, economic or some other shift,” he adds.
Share prices of major American defence companies have slumped in recent weeks, after Trump and senior advisers suggested they would seek to reduce support for European security and military aid to Ukraine.
European arms manufacturers, including Saab, Dassault, Leonardo, BAE Systems Kongsberg and Rheinmetall are enjoying a corresponding boom in their stock prices as interest in domestic procurement surges in capitals across Europe.
Such firms could see additional benefits from a further breakdown in trade between Washington and Ottawa, if Canada seeks to reorient its defence procurement away from American firms and toward their European competitors.
