WTO Civil Aircraft Pact Casualty of Tariff War

The Trump administration’s imposition of new tariffs disrupts a longstanding international framework that has facilitated largely tariff-free aerospace manufacturing and trade since the 1980s, challenging a key exporting industry, according to the Aerospace Industries Association.

The tariffs effectively dismantle exemptions established under the 1980 Agreement on Trade in Civil Aircraft, a plurilateral accord concluded under the General Agreement on Tariffs and Trade (GATT) and later incorporated into the World Trade Organization (WTO) framework in 1995. The agreement eliminated tariffs on civil aircraft, engines, parts, and related components among its signatories, which include the United States, the European Union, Canada, Japan, Switzerland, and others. Its aim was to foster competition, reduce costs, and promote international collaboration in the aerospace sector.

Termination of these exemptions raises production costs for aerospace manufacturers and increases procurement costs for airlines, which could pay more for new aircraft and spare parts.  

Worst case

Tariffs could mean the price of a Boeing 787 jet would increase by $40 million, Aengus Kelly, CEO of aircraft lessor AerCap Holdings NV, told CNBC last month. “No one is going to pay that.  The airlines who can’t afford the airplane will call Airbus. In a worst-case scenario, what would happen over time is that Boeing would end up with the United States — about 20-25% of the global market. Airbus would end up with the rest of the world — about 75-80% of the global market.”

“We continue to make a case to the administration, explaining to them the difference between aerospace and defence, and all other manufacturing sectors,” Aerospace Industries Association (AIA) vice-president of international affairs Dak Hardwick told Flight Global “It is meeting by meeting. It is call by call, to tell how we are different.”

“What the administration’s actions have done is make everything for our sector more expensive. If it’s made of metal it is now more expensive. And we use a lot of metal,”

Boeing as the United States’ largest exporter by dollar value, with approximately 80% of its commercial aircraft destined for foreign markets, faces significant exposure.

Airbus operates a final assembly line in Mobile, Alabama, and is similarly affected. Tariffs are expected to apply to imported components used in its U.S. operations, as well as to aircraft manufactured in France and Germany.