Features Economy
Tariff impacts on Canadian aviation

The Canadian government  on March 4 imposed 25 per cent tariffs on $30 billion in goods imported from the United States and in 21 days planned to up that total to $155 billion in retaliatory measures after U.S. Donald Trump signed an executive order to apply 25 per cent tariffs on all Canadian imports, with energy at 10 per cent. 

The first phase of Canada’s response includes products such as orange juice, peanut butter, wine, spirits, beer, coffee, appliances, apparel, footwear, motorcycles, cosmetics, and pulp and paper. A detailed list of these goods can be found at www.canada.ca. From an aviation perspective, aircraft tires are in scope to the Canadian tariff. Tariffs to be imposed on an additional list of imported U.S. goods worth $125 billion include steel and aluminum products, certain fruits and vegetables, aerospace products, beef, pork, dairy, trucks and buses, recreational vehicles, and recreational boats. 

On March 6, Trump agreed to exempt automobiles from newly imposed tariffs on imports from Canada and Mexico for the next month at the request of the three largest U.S. automakers. The U.S. administration also reiterated that reciprocal tariffs on goods from all nations that place fees on U.S. exports will go into effect on April 2. The Canadian countermeasures have been delayed, but if implemented would remain in place until the U.S. eliminates its tariffs against Canada. Of course, as the first weeks of 2025 have shown, all of these measures and threats can change in a heart, but the tariff burden is unlikely to dissappear anytime soon. 

The General Aviation Manufacturers Association (GAMA) 2024 Year End report noted a total of 4,118 aircraft and helicopters were shipped in 2024 with total billings of US$31.18 billion. European manufacturing accounted for 859 aircraft. GAMA issued a statement before the first tarifff reprieve. “Given the global nature of the aviation manufacturing industry, these proposed tariffs, as well as potential reciprocating tariffs, could have an enormous impact with many unintended consequences on the industry.” It noted that almost half the total revenue from general aviation manufacturers comes from exports, about $5.2 billion in 2023. “Tariffs would affect the intricate and very complex global supply chain that can take years to establish given that it relies on suppliers with unique capabilities that are highly regulated and therefore cannot be easily replaced.” 

Canadian aircraft manufacturers in the report included: Bombardier at 146 aircraft and US$7.0 billion in billings; Diamond Aircraft with 252 aircraft and US$205 million. Bombardier’s current backlog is valued at US$14.4 billion (as of December 31, 2024). De Havilland’s aircraft sales and deliveries are not publicly disclosed.

The National Business Aviation Association (NBAA) issued a statement that applauded the first pause in the tariff action, saying that the industry is reliant on a complex system of international agreements that ensure safe production of aviation products. 

In a press release, the NBAA noted: “Disruptions to this system have profound consequences, and workarounds that meet the exacting regulatory requirements take months or years to establish – challenges clearly demonstrated during the COVID pandemic. As with the pandemic, NBAA has concerns regarding tariffs, or anything else that could disrupt the industry’s unique supply chain, and the jobs, economic growth, manufacturing leadership and innovative edge that depend on it.”

In a February 3, 2025, briefing document, the Canadian Business Aviation Association (CBAA), stated: “This Executive Order signals a significant shift in U.S.-Canada trade relations, with potentially broad economic consequences. If Canada responds with countermeasures, the business aviation industry may see disruptions in cross-border travel, higher operating costs, and potential regulatory hurdles. The situation warrants close monitoring, especially for stakeholders in aircraft operations, manufacturing, and supply chains.” 

Anthony Norejko, President and CEO of the CBAA, added: “Canada needs to negotiate from a position of strength. With the Luxury tax and an impending tariff, BA will be seeing serious headwinds during these tumultuous times. We need a strong Canadian government with serious leaders who can help navigate these issues.” 

From an economist’s perspective, the financial impact of tariffs is designed to protect domestic labour. However, in this case, the weaponization of tariffs was strictly used to achieve other political goals. Economically, for many airframe manufacturers (e.g. Piper, Kodiak, Textron), Pratt and Whitney turbine engines, used on Piper M700, Kodiak and others, would increase their Cost of Goods Sold by 25 per cent. On a US$ 1 million engine, for example, this would increase the cost of the aircraft by US$250,000. However, the OEM may choose to add margin to their Cost of Goods Sold, say by 25 per cent. This would see the end user acquisition cost increase by US$312,500. For Canadian purchasers, the aircraft’s price (2025) of US$4.3 million would increase to US$4.6 million. However, if Canada extends its tariff (25 per cent) to the aviation sector (the current proposed phase one tariff has aircraft tires in scope) the price of the Piper M700 would increase to US$5.8 million (an impact of US$1,471,875). 

Aircraft manufactured in Canada like Diamond, Bombardier and De Havilland products could become uncompetitive. Large fleet sales to American Flight Training Units, may be impacted, causing OEMs to reduce their Canadian labour force. From a taxation perspective, corporate tax contributions to the Canadian coffers would be reduced. Smaller Canadian manufacturers, like Insight, which began designing and manufacturing Graphic Engine Monitors in 1981, will be at a competitive disadvantage against U.S. instrument manufacturers. Insight is taking a wait and see approach. 

As U.S. Customs and Border Protection (CBP) and Canadian Border Services Agency (CBSA) become acquainted with the tariffs, customs clearance delays may occur as imported aircraft await inspection and possible documentation issues. Aircraft importation is a complex process that involves navigating many taxation, regulatory and compliance issues. Customs duties, GST/HST and regulatory compliance will impact financial and legal considerations, which for the uninitiated could cause delays, additional costs and potential penalties. 

The first step in the importation process is to understand the regulatory requirements imposed by Transport Canada and the CBSA. These regulations govern everything from the condition and documentation of the aircraft to the payment of applicable duties and taxes. Currently there is some Fear, Uncertainty and Doubt (FUD) regarding the process.

Eric Martel, President and CEO, Bombardier on February 6, 2025, stated: “In light of the rapidly evolving landscape stemming from the February 1, 2025, executive orders signed by the President of the United States regarding new tariffs, Bombardier has elected to defer providing guidance and 2025 objectives.”

Bombardier customers operate a fleet of more than 5,100 aircraft, supported by a vast network of Bombardier team members worldwide and 10 service facilities across six countries. In 2024, Bombardier delivered 124 aircraft, with 50 to 60 per cent of the Challenger aircraft delivered to U.S. customers. With sophisticated customers who understand the financial markets, Bombardier has not seen sales decline in Q4 of 2024 and Q1 of 2025. Bombardier’s U.S. presence sees activity in 47 states, with over 10,000 jobs delivered directly by Bombardier and its suppliers. A tariff and rate adjustment would see a greater impact in the U.S. than Canada, but the company no doubt has been busy running financial modelling based upon a variety of scenarios.

On February 20, 2025, Daher released the following statement: “As the scope of the Trump administration’s tariffs is evolving, it is too early to assess potential effects for operations, pricing, the supply chain, etc. Because the aerospace industry is so interconnected and worldwide in scale, tariffs could bring harm to both America and Europe. The industry’s importance to the U.S. economy is underscored by the recent study sponsored by GAMA and seven other associations, which determined that general aviation supports a total of 1.3 million jobs and a total of $339.2 billion in total economic output in the U.S. As a reminder, general aviation was excluded from tariffs eight years ago during the first Trump administration based on its “interconnectivity” with the U.S. economy. In 2023, Daher announced its intention to create a third final assembly line for the company’s TBM and Kodiak general aviation aircraft families. The primary purpose of this new final assembly line – to be located at Daher’s Stuart, Florida aerostructures manufacturing facility – is to provide additional output in response to the continuing sales success for both the TBM (built in Tarbes, France) and the Kodiak (built in Sandpoint, Idaho). Based on the current political climate, creating additional production capacity for TBMs that are “built in America” could represent another advantage for Daher’s new Stuart, Florida, final assembly line.” 

Interestingly, the current tariff wars fly in the face of the North American Free Trade Agreement (NAFTA). On November 30, 2018, Canada, the United States and Mexico signed the new Canada-United States-Mexico Agreement (CUSMA), during the G20 leaders’ summit in Buenos Aires. Under the agreements, tariffs on virtually all originating goods traded between the U.S., Canada and Mexico were eliminated in 2008, except for Canadian agricultural goods in the dairy, poultry, egg and sugar sectors (which are exempt from tariff elimination). The wide scope of the agreement is indicated from the outset in agreed objectives. The Agreement will: eliminate barriers to trade in goods and services between the three countries; facilitate conditions of fair competition within the free-trade area; significantly expand liberalization of conditions for cross-border investment; establish effective procedures for the joint administration of the Agreement and the resolution of disputes; and lay the foundation for further bilateral and multilateral co-operation to expand and enhance the benefits of the Agreement. The agreement was replaced in July 2020 with the United States-Mexico-Canada Agreement (USMCA). The current situation initiated by the U.S., appears to contravene this agreement. | W

• Tweet

• The family of an airplane safety whistleblower is suing Boeing over his death
• Supporting the future of AME students