US aerospace industry anxious as tariffs loom
The US industry those tariffs were crafted to protect swiftly let the administration know it was not interested.
"Imposing broad tariff or non-tariff trade barriers on the imports of civil aviation technology would risk reversing decades of industrial progress and harm the domestic supply chain," the Aerospace Industries Association (AIA) said in a letter addressed to Lutnick and obtained by AFP.
The interested parties were given until June 3 to communicate their positions.
The very next day, Lutnick announced that Washington aimed to "set the standard for aircraft part tariffs" by the end of this month.
"The key is to protect that industry," he said, adding: "We will use these tariffs for the betterment of American industry."
But AIA and the Airlines for America (A4A) trade association voiced fear that far from helping, the tariffs would end up harming US manufacturers.
No fix needed
"Unlike other industries, the civil aviation manufacturing industry prioritizes domestic production of high-value components and final assembly," AIA pointed out.
According to the organization, US aerospace and defense exports reached $135.9 billion in 2023, including $113.9 billion for civil aviation alone.
This allowed the sector to generate a trade surplus of $74.5 billion and to invest $34.5 billion in research and development, it said.
The sector employs more than 2.2 million people in the United States across more than 100,000 companies, which in 2023 produced goods worth nearly $545 billion.
In its response to Lutnick, the A4A highlighted how beneficial the international Agreement on Trade in Commercial Aviation (ATCA) had been by helping to eliminate tariffs and trade barriers over nearly half a century.
"The US civil aviation industry is the success story that President Trump is looking for as it leads civil aerospace globally," it insisted.
A full 84 percent of production was already American, it said, stressing that Washington "does not need to fix the 16 percent" remaining.
"The current trade framework has enhanced our economic and national security and is a critical component to maintaining our national security moving forward," it said.
For manufacturers, the potential tariffs would act like sand jamming a well-oiled machine that has been running smoothly for decades, experts warned.
They would also throw off balance an ultra-sensitive supply chain still recovering from the Covid-19 pandemic.
'Competitive disadvantage'
"To avoid the situation getting worse, we advocate to keep aerospace outside of trade wars," Willie Walsh, head of the International Air Transport Association (IATA), told the organization's general assembly last week.
AIA meanwhile stressed that "aircraft and parts are already in high demand and have a limited supply."
"Integrating new suppliers and expanding capacity is complex, timely, and costly," it warned, pointing out that finding suppliers capable of meeting rigorous safety certifications could "take up to 10 years."
Delta Air Lines also argued for sticking with the status quo, cautioning that the proposed tariffs "would hinder Delta's ability to maintain its current trajectory."
"If component parts incur tariffs upon entering the United States, Delta will be at a competitive disadvantage to foreign competitors," it said.
"The action would also impose an unexpected tax on Delta's purchases of aircraft contracted years in advance."
Delta chief Ed Bastian insisted in late April that the airline "will not be paying tariffs on any aircraft deliveries we take," adding that it was "working very closely with (European group) Airbus" to minimize the impact.
Delta pointed out in its letter to Lutnick that it currently had 100 aircraft on order from Boeing, and that it was demanding that its Airbus A220s be produced primarily in Mobile, Alabama.
But if the tariffs are imposed, it warned, "Delta would likely be forced to cancel existing contracts and reconsider contracts under negotiation."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
France 24
3 hours ago
- France 24
EU gets 15% US tariff for cars, but fails to get wine reprieve
The US and EU released details of a trade deal that foresees lower car tariffs but no relief for Europe's wine sector, but Brussels said it would push for further concessions. US President Donald Trump and EU Commission President Ursula von der Leyen clinched a framework accord in July for most EU exports to face a 15% US levy. But many aspects remained unclear, as the EU sought to win carve-outs for some sectors and Trump threatened higher tariffs on others. FRANCE 24's Yuka Royer reports. Video by: Yuka ROYER
Fashion Network
5 hours ago
- Fashion Network
Walmart hikes annual forecast as low price focus draws shoppers
Walmart on Thursday raised its fiscal year sales and profit forecast, driven by strong demand from shoppers across all income levels, who have turned to the world's largest retailer as they worry about rising costs. The company's results show it has continued to benefit from growing price sensitivity among Americans, with revenue of $177.4 billion in the second quarter. Analysts on average were expecting $176.16 billion, according to data compiled by LSEG. Consumer sentiment has weakened due to fears of higher inflation, hitting the bottom lines of some retail chains, but Walmart's sales have remained resilient. The retailer expects annual sales to grow in the range of 3.75% to 4.75%, compared to its prior forecast of a 3% to 4% increase. Adjusted earnings per share is expected in the range of $2.52 to $2.62, compared to its previous range of $2.50 to $2.60. The Bentonville, Arkansas-based chain got a boost from a sharper online strategy as more customers relied on home deliveries. Its global e-commerce sales jumped 25% during the quarter, and it touted that one-third of deliveries from stores took three hours or less. Walmart's total US comparable sales rose 4.6%, fuelled by solid demand in grocery, health and wellness, and online sales, beating analysts' estimates of a 3.8% increase, according to data compiled by LSEG. Average spending at the till rose 3.1% from 0.6% last year. It logged 40% growth in marketplace sales, including electronics, automotive, toys, and media and gaming. The retailer had warned it would increase prices this summer to offset tariff-related costs on certain goods imported to the US, a move that drew criticism from President Donald Trump. Several other apparel, footwear, and packaged goods retailers have issued similar warnings in response to import tariffs. A day earlier, Target warned of tariff-induced cost pressures, even as it reiterated that price increases would be considered only as a last resort. Two-thirds of Walmart's US sales were from domestically-sourced products, executives had said last quarter, which gave it some insulation from tariffs compared to competitors. Walmart's projection of third-quarter sales at $168 billion was below Wall Street estimates for sales of $176.33 billion.
Fashion Network
5 hours ago
- Fashion Network
‘Kill Bill' sneakers turn Japan soft power into hard profits
The unlikely must-have item for tourists in Japan is the footwear of choice of Kill Bill's protagonist. Onitsuka Tiger, the fashion brand reborn when Uma Thurman's The Bride wore its sneakers in Quentin Tarantino's 2003 movie, is enjoying record sales. Asics Corp. discontinued the brand for decades until the early 2000s, but post-Covid visitors can't get enough of the comfy, timeless trainers. Revenue in Japan has doubled in a year, with tourists accounting for almost all the surge. Onitsuka is by far Asics's highest-margin segment, with a new flagship store on the Champs-Élysées in Paris and plans for shops in the US. Shares are up eightfold in the past five years, helping its market capitalisation to recently pass $20 billion. It's also more evidence that visitors to Japan are a growth driver. Complaints about over-tourism get the headlines; online grumbles surround the 'shadow economy' of Asian travellers said to extract more than they spend. But the evidence is there for all to see in the 8.1 trillion yen ($55 billion) of foreign spending last year — and increasingly in profits at firms like Asics. It's far from alone. The focus of the most recent earnings season might have been the impact of US tariffs, but a more interesting narrative is a surge in authentically Japanese brands reaching tourists or expanding abroad. The weak yen is, of course, a factor. But more important is the strategy of creating fans of the country, who connect with a part of the culture and want to spend on it at home. And from Muji to Mario and Hello Kitty to Uniqlo, these firms are having record quarters, helping propel the Nikkei 225 to a series of record highs. Consider Kitty's maker, Sanrio Co. While it still generates its largest chunk of revenue domestically, tourists now account for around 40% of its product sales here (the data is trackable thanks to Japan's sales-tax exemption scheme). Shares are up more than 10 times from the 2019 level. Or Food & Life Cos, the owner of conveyor-belt sushi leader Sushiro. Its restaurants in Tokyo and other city centers are thronged with travelers, and it has been expanding abroad. The company aims to have 320 stores overseas by fiscal 2026, from just 38 five years ago. The first Sushiro in mainland China opened last year, with reports of customers queueing for 10 hours for some chutoro. Ryohin Keikaku Co. now has more Muji locations outside Japan than at home, selling minimalist notebooks and no-brand cosmetics. Without simplifying Japan into ikigai and other reductive nonsense, these firms do have a common link. It's some combination of affordability, high quality and an aesthetic minimalism that taps into feelings consumers have long associated with 'Japan-ness.' (The same can be said about foreign brands that try to ape this look, such as the Chinese retailer Miniso Group Holding Ltd.). Companies that can take this and tap into newfound customers at home or overseas have significant upside, as the country seeks to attract 60 million tourists spending an annual $100 billion by the end of the decade. The exemplar of this transformation is Fast Retailing Co., the operator of Uniqlo. It was once the poster child for how a deflation-beset country was turning to cheap fast fashion. 'Basic Chic From Japan. But Will It Sell?' asked a New York Times headline in 2006, when Uniqlo opened its flagship outlet in the city; back in those days, 90% of sales were in its home market. Since then, it has transformed itself into a minimalist yet iconic fashion brand, and overseas turnover overtook domestic in 2022. Of course, not every successful company needs to be minimalist. At the other end of the spectrum is retailer Pan Pacific International Holdings Corp. Its Don Quijote stores are an assault on the senses, but it is a brand that tourists associate with the country — and in turn can generate higher margins than most discount retailers. It's expanding in Japan with even more shops to cater to visitors, with plans to more than double those sales to $2.7 billion by 2035. That's before we even get into more iconic names such as Nintendo Co. and the gaming and comic giants that benefit from the recent infatuation with Japan's soft power. If a traveller carries an Onitsuka Tiger bag, odds are the other hand holds one from Nintendo, Capcom Co. or Sega Sammy Holdings Inc.'s merchandise stores. More brands can tap into this, too: A recent collaboration between Sega's Sonic the Hedgehog and VF Corp.'s Timberland shoes sold out in minutes. Souvenirs of a trip can be quickly discarded. But these brands are positioned to better stand the test of time — and turn Japan's soft power into hard profits.
