By Allison Lampert and Dan Catchpole
(Reuters) – Tariffs imposed by the U.S. and other countries in retaliation have prompted some business jet buyers to try to rush deliveries or add contract clauses to protect themselves from the duties, as the aviation sector braces for higher costs of planemaking materials, industry experts said.
Canada and the European Union hit back on Wednesday with retaliatory duties against the United States after the White House introduced 25% tariffs on all imported steel and aluminum, metals, which are used to make planes.
The U.S. may impose additional tariffs in April on Mexico and Canada.
Makers of private or business jets, such as Canada’s Bombardier, General Dynamics’ Gulfstream Aerospace and Textron, have seen their order backlogs grow on demand from wealthy travelers and corporate clients.
While commercial planemakers such as Boeing and Airbus, and large aerospace suppliers, have not warned of any major impact on aircraft production and deliveries, tariffs that have pressured financial markets are creating uncertainty for investors and buyers.
Bombardier did not provide guidance this year due to the tariff threat, while some trade groups have flagged concerns that a drawn-out trade war would hit a globally integrated aerospace supply chain.
Amanda Applegate, a partner at Soar Aviation Law, said she has seen some buyers of non-American private jets located outside the country add clauses to protect themselves from higher costs if their purchases get hit with tariffs.
Others are trying to close deals quickly, before further tariffs hit. One European buyer of a U.S. private jet has been trying to rush a transaction, said Katie DeLuca, a partner at Florida-based law firm Harper Meyer.
“That is what I’ve been seeing in that area, that rush transaction, get it exported, get it into Europe before a potential issue will arise,” DeLuca told a Tuesday webinar held by the National Business Aviation Association.
DeLuca added she has also seen a transaction in which a U.S. buyer tried to terminate a deal with a non-U.S. seller for a used Canadian aircraft based abroad.
A Bombardier spokesperson said its parts are distributed from Chicago and its planes can be delivered to customers in the U.S. without incurring tariffs in the world’s largest market for private planes, as the company is compliant with the U.S.-Mexico-Canada trade deal.
A U.S. tariff exemption on USMCA-compliant goods from Mexico and Canada is set to end in April.
PARTS COSTS
The Aerospace Industries Association and a coalition including U.S. airlines and business jet manufacturers have raised alarm over tariffs hitting the industry’s supply chain, which produces critical parts.
