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Tariffs disrupt aerospace industry, affecting deliveries

and

costs

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Delta says it would defer plane deliveries instead of

paying

tariffs

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Airbus may prioritize non-US customers if tariffs disrupt

imports

By Allison Lampert and Rajesh Kumar Singh

MONTREAL/CHICAGO April 11 (Reuters) - Cars, consumer

goods, and industrial equipment have been delayed at ports,

stuck on rail cars, and languished in warehouses at times over

the last few months due to the White House's on-again, off-again

tariff policy.

Planes and their engines are usually ordered by U.S. buyers

years in advance, and tariff confusion risks delaying shipments

of both, even if the industry has not been directly targeted for

duties, sources told Reuters. The frequent changes and added

costs are stressing a supply chain that has wrestled with

shortages of parts and labor.

Outside Montreal, workers at Airbus' Canadian plant

assembled a single-aisle A220 jet over the last several months,

even as the shifting tariff policy made it unclear whether the

plane would go to its intended customer, Delta Air Lines ( DAL )

, with or without a 25% duty.

The rapidly changing landscape means Delta might receive the

130-seat plane without tariffs, or could owe duties to the U.S.

government for parts made outside the United States. The

aircraft is expected to be delivered in June, according to

aviation analytics firm Cirium.

Delta and Airbus declined comment on whether the A220 jet

would be subjected to the levy.

Tariffs have rarely been an issue for aerospace. Aside from

an 18-month transatlantic tariff war over Airbus and Boeing ( BA )

subsidies in 2020 and 2021, the industry has operated

under a 1979 treaty guaranteeing zero-duty trading that includes

the U.S. and Canada, but not Mexico.

But President Donald Trump's frequent tariff changes during

assembly of this A220 jet illustrate how his strategy adds risks

for planemakers and airlines alike.

In early February, as Airbus employees in Mirabel, Quebec,

worked on the plane's interior near the start of the assembly

line, a source said, Trump threatened a 25% tariff on goods

imported from Canada and Mexico. The levy would have raised the

cost for Delta substantially on a plane worth about $40.5

million, according to Cirium delivery data from 2024.

SHIFTING TARIFF POLICY

Just before that tariff was to go into effect, Trump delayed

it for 30 days, and then said goods compliant with the

Trump-negotiated U.S.-Mexico-Canada Agreement would be exempt

from duties. Those requirements forced Canadian aerospace

companies to scramble to sort out paperwork they had not

previously needed.

This particular plane, recently painted in Delta's colors,

was believed to comply with the 2020 agreement, and hence exempt

from tariffs, industry sources said. Canada's Bombardier

has said its jets are compliant, and they have been

delivered to U.S. clients without duties, one of the sources

told Reuters.

But the confusion was so great that at a recent factory

meeting, Airbus told workers the tariff situation was complex

and constantly evolving, according to a source who attended.

Tariffs could also lead to heated negotiations between

manufacturers and airlines over who pays. Delta said on

Wednesday it would defer deliveries instead of paying tariffs as

it tries to control costs in the face of slowing travel demand.

"The one thing that you need to know we're very clear on is

that we will not be paying tariffs on any aircraft deliveries,"

CEO Ed Bastian told analysts. "We've been clear with Airbus on

that, and we'll work through and see what happens."

'UNPRECEDENTED UNCERTAINTY'

As of the end of 2024, Delta estimated it would receive 43

aircraft from Airbus. A number of those jets were expected to

come from its production lines outside the U.S.

Airbus' CEO Guillaume Faury warned in February the company

could prioritize deliveries to non-U.S. customers if tariffs

were to disrupt imports.

After Trump announced a 90-day pause on many tariffs on

Wednesday, Treasury Secretary Scott Bessent suggested Canada

would face a 10% tariff along with other countries, before a

White House official clarified there was no change.

The tariff confusion has roiled the industry. Some shipments

of RTX engines from one of its Canadian units to U.S.

clients were temporarily delayed as the company procured

paperwork to prove USMCA compliance, two senior industry

executives said. RTX declined comment.

Trump's policy has caused "unprecedented uncertainty" that

has also stalled travel demand, Bastian said on Wednesday,

warning the economy would lose steam until the tariff-induced

uncertainty was resolved.

"I hope our leaders in Washington are paying attention," he

said.