Boeing does not expect new tariffs imposed by US President Donald Trump to significantly impact its commercial aircraft business, at least not immediately.
“We don’t see material near-term impact. Part of that is because we have a lot of inventory that was purchased pre-tariffs,” Boeing chief financial officer Brian West said on 19 March during an investor conference hosted by Bank of America.
He adds that 80% of Boeing’s commercial aircraft spending and 90% of its defence-manufacturing spending is with domestic US suppliers.
“We think we’ve got that pretty well managed,” West says of tariffs.
His comments come after the Trump administration on 4 March slapped 25% import tariffs on Canadian and Mexican goods. On 12 March, the USA also imposed 25% duties on all imported aluminium and steel.
The moves prompted pushback from US airline and aerospace lobbying groups, which in a 12 March letter to US officials asked that the aerospace sector be exempted “from any tariff consideration”.
Addressing the tariff issue, West says the Trump administration “is well aware of” the global nature of the aerospace industry’s supply chain and of the industry’s broad importance to the USA.
Boeing is prepared to weather a trade war partly because it accumulated a large inventory of parts in recent years, West notes. The company did so after slowing commercial aircraft assembly due to quality issues and a machinists’ strike last year.
West adds that Boeing purchases “nearly all” its aluminium and steel from US suppliers and that those metals account for only “1-2% of the average cost of an airplane”.
That may be true, but the aluminium supply chain is still heavily dependent on non-US suppliers.
That is because US firms primarily produce aluminium alloys (which are used in aerospace manufacturing) using “pure aluminium” sourced from companies outside the USA, including to a large degree those in Canada, says Kevin Michaels, managing director of consultancy AeroDynamic Advisory.
Sheila Kahyaoglu with financial firm Jefferies estimates that the aluminium and steel tariffs mean Boeing needs to charge 15% more for a 737 and 5% more for a 787 to maintain the same profit margins, according to a 12 March research report.
