Tariffs, as government-imposed trade barriers, have consistently shaped global commerce. In the aerospace and defense (A&D) sectors, these tariffs can mean the difference between market expansion and contraction, impacting costs, operations, and global competitiveness. As the world navigates ongoing geopolitical tensions, trade policies are in flux—making it imperative for industry stakeholders to understand both the current landscape and its implications for the near future.
Recent years have witnessed a wave of tariffs introduced across pivotal economies, particularly between major aerospace exporters, such as the United States, the European Union, and China. These trade measures have targeted a wide array of goods, including aircraft parts, avionics, advanced materials, and finished components essential for defense systems.
As of 2023, average global tariffs on aerospace products reached as high as 10%, marking a sharp increase from pre-2018 levels, when most aerospace materials moved with less than 3% average tariffs. Notably, the U.S. and the EU, once fierce rivals in aircraft manufacturing, levied over $11 billion in reciprocal tariffs annually during ongoing disputes centered on aircraft subsidies, notably involving high-profile programs such as large commercial jets.
The immediate impact of tariffs is their upward pressure on costs throughout the aerospace supply chain. Original Equipment Manufacturers (OEMs) and suppliers alike are grappling with higher raw material expenses, notably for aluminum and titanium alloys—aerospace staples heavily affected by both U.S. and EU tariffs.
According to recent data from Business Insights, aircraft component costs rose between 5% and 15% year-over-year from 2022 to 2023, directly linked to tariff hikes. For defense contractors, components for military aircraft and satellite systems saw cost surges of up to 20% in some cases, forcing project bids and government contracts to be renegotiated or delayed.
Tariffs are prompting aerospace & defense players to reevaluate supplier networks and adjust procurement strategies. Airbus, Boeing, and leading defense contractors are diversifying vendor bases and investing in alternative supply routes to mitigate tariff exposure. For example, several A&D giants publicly announced moves to source composite materials from countries not affected by recent U.S.-China tariffs. This shift is particularly notable in Asia-Pacific, where intra-regional trade in aerospace parts grew by 8% year-on-year, as businesses sought to circumvent North American and European trade barriers.
Additionally, tariffs have influenced mergers, acquisitions, and collaborations, with cross-border joint ventures on the rise. Companies are increasingly partnering with local firms in tariff-friendly markets—fueled by the desire to maintain price competitiveness and avoid duty surcharges on finished goods.
Tariff-induced cost increases have translated to pricing pressures and slower export growth. U.S. aerospace exports, for example, declined by nearly $9 billion in 2023, according to Business Insights, with aircraft deliveries to China falling the most dramatically. This drop in exports has a cascading effect: major aerospace hubs reported workforce reductions, with some states experiencing a 6% drop in aerospace manufacturing employment since 2022.
Conversely, defense spending in certain markets has partly offset these declines. European nations, amid heightened security concerns and supply chain realignment, increased defense procurement budgets by over 9%, benefiting local manufacturers but ramping up costs for imported components due to persistent tariffs.
While tariffs present undeniable challenges, they also drive industry-wide innovation. Market leaders are investing in advanced manufacturing (such as additive manufacturing and digital twin technologies) to reduce reliance on imported parts and improve cost structure. Governments, on the other hand, are being urged to revisit long-term trade policy frameworks to ensure the A&D sector remains globally competitive without stifling innovation or international collaboration.
For stakeholders, staying informed about trade developments and preparing for regulatory volatility is no longer optional—it’s essential. Real-time supply chain analytics, adaptable sourcing, and robust trade compliance programs will shape future winners in this high-stakes industry.
The economic impact of tariffs on the aerospace and defense industry is complex and far-reaching. While they cushion domestic players in some regions, in the long term, tariffs disrupt global supply chains, inflate costs, and threaten exports and jobs. As the sector adapts to the realities of an evolving trade landscape, the next few years will reveal which companies and nations can convert these challenges into new avenues for growth and resilience.