Trade Dispute Adds Uncertainty To European Ramp-Up Plans

Trade Dispute Adds Uncertainty to European Aerospace Ramp-Up Plans

As Europe’s aerospace sector begins to recover from years of supply chain disruptions, a new wave of uncertainty threatens to undermine its progress. The prospect of escalating U.S. tariffs, coupled with the European Union’s plans for retaliatory measures, has cast doubt over the industry’s ability to sustain planned production increases. With deadlines for potential tariff hikes shifting amid ongoing negotiations, the 2025 Paris Air Show is expected to arrive without clear resolutions.

Escalating Tariffs and Retaliation Plans

Just days after U.S. President Donald Trump threatened to raise tariffs on European Union goods from 10% to 50%, he announced a suspension of the increase until July 1, pending a possible settlement that could include aerospace products. In response, the EU has prepared a detailed retaliation plan targeting a broad range of U.S.-made aerospace goods, including completed aircraft and critical components. This tit-for-tat dynamic has introduced significant uncertainty into the market, complicating efforts to stabilize and grow production.

The repercussions extend beyond aerospace. Financial markets have reacted with volatility as investors reassess U.S. assets in light of potential trade barriers. The European Central Bank has acknowledged a fundamental shift in the economic regime, with companies across various sectors bracing for impact. For instance, Brown-Forman, a major U.S. spirits producer, has reported declining sales amid sustained consumer uncertainty and the looming threat of tariffs. Competitors in the distilled spirits industry also forecast sales below historical trends, while the possibility of steep tariffs on European goods and Apple products has further unsettled markets.

Impact on Aerospace Supply Chains and Industry Response

Within aerospace, manufacturers are already feeling the strain. Safran CEO Olivier Andries noted that the supply chain had progressively recovered and was nearing normalization by the end of last year. However, he cautioned that the situation could deteriorate rapidly. Suppliers are experiencing inflationary pressures due to tariffs and, in some cases, have threatened to halt deliveries unless manufacturers absorb the increased costs. “We are monitoring the situation very carefully,” Andries said, emphasizing that tariffs introduce a new layer of risk to an already fragile supply chain.

Airbus CEO Guillaume Faury echoed these concerns, describing the levies as “significant” and underscoring the complexity and unpredictability surrounding their implementation. Deutsche Aircraft co-CEO Nico Neumann also warned that parts of the supply chain could suffer, with downstream effects for manufacturers.

Despite these challenges, some analysts offer cautious optimism. Bank of America’s Ron Epstein suggested that the impact of tariffs may be “significantly more manageable than expected around two months ago,” crediting European aerospace firms for their creative mitigation strategies. Airbus, for example, recently delivered an A350 to Delta Air Lines in Japan, thereby avoiding immediate U.S. import tariffs. However, parts destined for Airbus’s Mobile, Alabama assembly line and deliveries to U.S. airlines remain subject to the 10% tariff.

Safran’s Olivier Andries explained that the company is optimizing logistical flows to minimize tariff exposure. “Whenever possible, we ship directly from Country A to Country B, bypassing the U.S. if unnecessary,” he said. Ultimately, any remaining tariff costs will be passed on to customers. “We will apply a tariff surcharge, and we won’t be shy,” Andries added. “At the end of the day, the tariff situation is creating inflation. So be it.”

As the aerospace industry braces for further developments, the combination of trade uncertainty, shifting consumer sentiment, and volatile markets continues to cloud the outlook for Europe’s planned production ramp-up.