President Donald Trump’s decision to halt trade talks with Canada, announced on June 28, 2025, has sent ripples through industries reliant on cross-border commerce.
The aerospace sector, particularly aircraft manufacturing, faces significant risks due to threatened tariffs and disrupted supply chains.
While some protections exist, the claim that aircraft will remain unaffected seems to be overly optimistic.
Aerospace Industry and the Trade Halt
Trump’s move responds to Canada’s Digital Services Tax (DST), which costs U.S. tech firms up to $3 billion.
He has threatened new tariffs on Canadian goods within seven days, including 25% on non-USMCA-compliant products, 50% on steel and aluminum, and 25% on foreign-made vehicles and parts.
Aerospace, a cornerstone of U.S.-Canada trade, is caught in the crossfire. Canada exported C$12.8 billion ($8.91 billion) in aerospace products to the U.S. in 2023, while importing C$10.2 billion. This gives a sense of the sector’s deep integration.
Will Aircraft Be Unaffected?
Some argue aircraft could dodge the fallout. A 1979 U.S.-Canada treaty exempts aircraft parts from tariffs, and the U.S.-Mexico-Canada Agreement (USMCA) ensures duty-free trade for compliant goods.
Analyst Alex Krutz from Patriot Industrial Partners suggests aerospace components may avoid tariffs, as they’re less likely targets than high-volume goods.
Companies like Optima Aero are pre-emptively moving inventory to the U.S., and “duty drawback” provisions could refund tariffs on re-exported goods, softening the blow.
However, these protections aren’t foolproof. Trump’s history of overriding trade agreements raises doubts about exemptions holding.
If new tariffs hit, non-USMCA-compliant aerospace products could face a 25% cost hike, directly affecting aircraft prices and production.
Tariff Risks for Aircraft Manufacturing
Tariffs could hit hard. Bombardier, a Canadian business jet giant, relies on the U.S. as its largest market. A 25% tariff could make its aircraft less competitive, as analyst Brian Foley notes, pointing to a stock slump after prior tariff threats.
U.S. manufacturers like Boeing, already grappling with production challenges, depend on Canadian suppliers for parts and materials. Existing 50% tariffs on steel and aluminum, critical for aircraft, could further inflate costs.
Canadian retaliatory tariffs add another layer. Canada has imposed 25% tariffs on $43 billion of U.S. goods and 50% on steel exceeding quotas.
Further tariffs could target U.S. aerospace exports, like Pratt & Whitney Canada engines (made by a U.S.-owned firm in Canada), impacting Canadian firms like Bombardier and U.S. companies like Textron Aviation.
Supply Chain Disruptions
The U.S.-Canada aerospace supply chain is tightly knit. Companies like Mitchell Aerospace send parts across the border for processing, a process now at risk of delays and costs.
The Aerospace Industries Association warns that tariffs could jeopardize U.S. competitiveness as a top aerospace exporter, threatening jobs.
The International Association of Machinists and Aerospace Workers has called for a tariff pause, citing risks to workers in both nations.
The F-35 program, where Canada is a key supplier, faces uncertainty. While Canada’s $19 billion commitment to 88 F-35 jets remains, trade tensions could disrupt parts supply.
Looking Ahead
Trump’s tariffs may be a negotiation tactic to pressure Canada into dropping the DST. If Canada complies, trade talks could resume, sparing aerospace.
However, prolonged disruptions could force companies to seek costlier suppliers elsewhere, a process that’s neither quick nor cheap. The next seven days, when new tariffs may hit, will be pivotal.
The notion that aircraft will be unaffected seems to be wishful thinking. While treaties and negotiations offer some hope, tariffs, retaliatory measures, and supply chain risks threaten higher costs and delays.
Aerospace giants like Boeing and Bombardier, along with workers and consumers, face an uncertain future. For now, the industry will be watching just how this trade dispute unfolds.