The recent wave of U.S. tariff increases is just the beginning of what could be a global trade tsunami, hitting industries that have spent decades building around the idea of a barrier-free world.
The commercial aviation industry, long caught in the debate between protectionism and liberalization, now finds itself especially vulnerable to this sudden shake-up.
While the U.S. measure may appear to be an aggressive nudge to renegotiate global trade rules, the industry fears rising operating costs, a potential drop in passenger demand, and major disruptions in global supply chains—a triple threat that could stall a recovery that had only just begun following the pandemic.
Latin America—and particularly Brazil—faces its own complex set of ripple effects.
Costs, demand, and supply chains: Under Pressure
Rising operating costs: Airlines are seeing a spike in the price of imported parts and components essential for maintenance, repair, and overhaul (MRO). Manufacturers like Boeing and Airbus are grappling with higher production costs due to tariffs on critical raw materials like steel and aluminum, as well as imported components.
This cost burden could trickle down to the price of new aircraft, tightening the financial screws on carriers already grappling with fuel price volatility. Even ground support equipment and airport infrastructure projects could take a hit.
Higher aircraft prices directly affect leasing contracts, which ripple across the industry—from brand-new deliveries to secondhand aircraft leased by smaller carriers.
Demand downturn: The trade war's economic uncertainty could dampen global growth. Historically, recessions reduce discretionary spending, impacting both leisure and business travel.
If airlines pass on rising costs to passengers, demand could drop further, hit by both reduced purchasing power and pricier international fares—especially on U.S.-linked routes.
Fragmented supply chains: Aircraft production relies on a sprawling web of global suppliers. New tariffs on components—and the potential expiration of exemptions like those in USMCA for Mexico and Canada—could break this delicate balance, causing delays in aircraft production and delivery.
Boeing, with its global supply base and export focus, is particularly exposed, while Airbus also risks delays due to its European-sourced parts used outside the EU.
This disruption threatens to reverse decades of supply chain optimization in aerospace. It also marks the potential end of 45 years of tariff-free trade in civil aircraft under the WTO’s Aircraft Trade Agreement.
Global response: retaliation or resignation?
U.S. trade policy is prompting strong reactions. Key partners like China and the European Union have either announced or implemented retaliatory tariffs—some targeting aerospace products.
This could damage the global competitiveness of firms like Boeing in crucial export markets and spark a broader trade war with unpredictable, but likely negative, consequences for global aviation. Changing travel patterns may also emerge, with passengers favoring less affected or more affordable destinations over the U.S.
Latin America: sadness never ends, but calm sure does
While most Latin American countries face a base tariff of 10% on exports to the U.S.—lower than the rates imposed on China or the EU—the impact will still be felt.
Direct and indirect effects: The tariffs could reduce export revenues, limiting investment in sectors like aviation. A slower global economy would indirectly hurt Latin American economies and air travel demand. Tourism between the region and the U.S. may also decline.
Brazil under the spotlight:
Airlines: Face higher operating costs due to imported parts and maintenance. Brazilian retaliation could worsen the situation. A drop in global or U.S. demand could further squeeze revenues.
Embraer: The Brazilian aerospace giant now faces a 10% tariff on aircraft and equipment exports to the U.S., reducing its competitiveness compared to rivals from exempt regions like Canada under USMCA. Production costs will also rise due to tariffs on imported components. Analysts like Wolfe Research have flagged the risk, downgrading Embraer from Outperform to Peer Perform.
Tourism: Rising travel costs and economic uncertainty could reduce two-way tourism between Brazil and the U.S.
Still, it’s not all doom and gloom. Some analysts suggest that Latin American products, including those from Brazil, may gain relative competitiveness in the U.S. market versus higher-tariff regions. It could also spur deeper trade ties with markets like China.
Uncertainty and mitigation strategies
Most experts agree on the generally negative outlook—rising costs, shrinking demand, and supply chain disruption—but also emphasize the high level of uncertainty. To mitigate the impact, the aviation industry will likely:
- Diversify suppliers
- Lobby governments for exemptions
- Optimize logistics and pricing strategies
- Double down on operational efficiency and cost control
The new U.S. tariffs present a major challenge for global commercial aviation. While Latin America and Brazil may not be hit as hard as other major economies, the fallout on costs, demand, Embraer’s competitiveness, and tourism is clear.
The industry now enters a period of volatility and strategic recalibration. Navigating this increasingly turbulent global trade environment will require adaptability and foresight. Stakeholders across the aviation sector should prepare for fast-moving changes—and stay vigilant.
Time will tell.
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