Aircraft fly free, but the materials that build them remain taxed and volatile…

On 27 July, President Donald Trump and European Commission President Ursula von der Leyen announced a sweeping trade framework that averted what could have escalated into a bruising transatlantic trade war from 1 August. The deal, which halves tariffs on goods imported from the EU to the USA from 30% to 15%, offers relief across a range of sectors, from automotive to semiconductors, pharmaceuticals to agriculture.

Critically, it reinstates a decades-old tariff exemption, “zero-for-zero”, for the aerospace sector, eliminating duties on aircraft, engines, and spare parts between the US and EU.  Raw materials, however, remain another story.

While the announcement signals a thaw in trade hostilities, it is no panacea for the aerospace industry. Boeing, RTX, GE Aerospace, and their suppliers remain mired in a trade climate still fraught with risk, thanks to sustained metal tariffs for aluminium and steel products (among others), an unresolved Section 232 investigation, and a fragile global supply base strained by years of shock.

The Section 232 investigation was launched by the US Department of Commerce in March of this year, aiming to assess whether aircraft and engine imports compromise national security. The consensus view by industry watchers is that the Section 232 investigation does not align with how supply chains and trade flows currently function in the aerospace and defence sectors.

However, should this happen, the exemptions gained in the latest EU deal may be effectively erased. The biggest win is the return of the 1979 Civil Aircraft Agreement framework. For Boeing, this removes a looming burden of aircraft and engine tariffs, potentially softening export headwinds and boosting foreign order flow. And the momentum is visible: Boeing has announced deals for hundreds of jets from countries like Indonesia, Bangladesh, the UAE, Qatar, and Saudi Arabia. These orders not only offer President Trump an industrial policy win but also offer Boeing a recovery path after years of delivery disruptions and reputational damage.

Yet even as Boeing gains short-term breathing room, it remains boxed in by soaring input costs. The same deal that lifted tariffs on aircraft parts left intact the US’s 50% duties on imported aluminium and steel, which are vital materials for engine casings, fuselages, landing gear, and airframe structures. The result? A fully assembled aircraft that can be sold across the Atlantic duty-free still had to absorb upstream cost inflation from every bolt and bracket made from raw material imports.

In other words: aircraft fly free, but the materials that build them remain taxed and volatile.

Jet engine manufacturers are especially exposed. RTX, the parent company of Pratt & Whitney, absorbed a US$125M tariff-related cost hit in the first half of 2025 alone, with 2025 exposure now projected at US$500M. Despite full-year revenue guidance rising by over US$1Bn, the company has cut its earnings guidance, citing raw material pressures and delivery delays.

GE Aerospace faces a similar storm, with estimated 2025 tariff-related costs approaching US$500M. The company has so far been able to offset these tariff pressures, raising full-year guidance and strong growth compared to 2024 levels, but executives warn that, longer term, the foundational economics maintenance and support contracts are under threat as pricing volatility undermines predictable lifecycle costing.

Even small- and mid-tier suppliers, often located in Canada, Mexico, or the EU, are reeling. Lacking the leverage to pass on costs, they are still having to consider stockpiling raw metals, restructuring contracts, or exploring reshoring efforts, putting additional pressure on operating margins. The Aerospace Industries Association has warned that prolonged supply disruption could jeopardise not just delivery schedules, but air safety itself.

Defence primes like Lockheed Martin, Raytheon, and Northrop Grumman, already facing raw material inflation, could see new barriers to parts sourcing and transatlantic industrial collaboration. The lack of clarity on EU commitments to purchase US military equipment, though politically touted, adds to the strategic ambiguity. Until contracts are signed and volumes confirmed, the upside for the US defence base remains speculative.

Airbus, by contrast, appears less exposed. With diversified manufacturing across Europe, China, and its US final assembly line in Alabama, Airbus has been able to mitigate tariff risks. Though still affected by high US duties on imported components and metals, the company's wider geographic footprint and supplier flexibility afford it more insulation to trade friction than Boeing.

On 30 July, President Trump issued an executive order imposing a 40% emergency tariff surcharge on most Brazilian imports, effective from 6 August. Notably, civil aircraft and related components, including engines, landing gear, avionics, and interior systems, were exempted from the additional duty. These products will continue to face only the baseline 10% reciprocal tariff introduced in April of this year, offering critical relief to Brazil’s aviation sector. The exemption is particularly significant for Embraer, whose commercial jet business remains heavily reliant on the US market, with more than half of its regional aircraft deliveries destined for American operators. In contrast, military aircraft and defence-related components were not excluded, making them fully subject to the new 50% total tariff burden, raising costs and potential procurement challenges for transatlantic defence cooperation.

In China, COMAC continues to operate outside the direct reach of US tariffs. Its C919 narrowbody program, aiming for 50 deliveries this year, may benefit from retaliatory distancing from Boeing by Chinese airlines. But COMAC’s lack of FAA or EASA certification means it remains locked out of high-margin Western markets until 2028 at least, and possibly into the 2030s.

Defence players may welcome the symbolism of renewed US–EU cooperation, but without a decisive rollback of metal tariffs and clarification on future military procurement, the promise remains hollow. Meanwhile, lawsuits challenging President Trump’s authority to impose tariffs without Congressional approval are winding their way through federal courts. If those efforts succeed, the entire structure could be upended, resetting trade dynamics yet again.

In conclusion, the aerospace industry needed certainty, coordination, and cost stability. What it got was a tactical trade ceasefire, which is valuable, but insufficient. Unless further agreements expand exemptions to upstream materials and extinguish the Section 232 threat, the global aerospace sector will remain in a holding pattern. For Boeing, RTX, GE, and their peers, this is the start of a new takeoff, it is a turbulent climb with headwinds still gathering.

On the raw and alloyed materials side, demand is still lagging its peak, with deliveries plummeting in 2019 flowing two fatal crashes of Boeing aircrafts and then further impacted by the COVID-19 pandemic. With the supply chain of aircraft parts still causing bottlenecks for OEMs to meet order targets, demand is only expected to recover to 2018 levels in the early 2030s. As an example, aluminium demand in both airframes and jet engines is expected to double over the next decade and grow to new records, based on structural trends in air travel and cargo (see Figure 1). With the entrance of COMAC in China ramping up its own aircraft delivery base, aircraft part supply chains will see new competition with raw material supply chain dominance a key factor for existing OEMs to pay attention to.