Boeing, its suppliers and the Seattle-area aerospace industry are in for a bumpy ride as they navigate President Donald Trump's turbulent trade war.
Scott Hamilton, an aerospace analyst with Leeham News and Analysis, visualized the tariffs as a dark storm cloud hanging over the industry and, particularly, its key U.S. manufacturer: Boeing.
"It's just a thunderstorm and all we're doing is waiting for the lightning strikes," Hamilton said.
The aerospace industry, like so many other economic sectors, has been anticipating some fallout from the Trump administration's new tariffs.
In the worst-case scenario, the tariffs, essentially taxes on goods imported into the U.S., could increase the cost of airplane parts and the finished product, disrupt the industry's extensive supply chain and lower demand if the U.S. dips into a recession. Delta Air Lines CEO Ed Bastian said on a call with investors this week that it's already seeing a dip in bookings.
For those companies tasked with making the plane — from manufacturers like Boeing to engine-makers to those businesses that make nuts, bolts and fasteners — it could take months to change suppliers, industry analysts said. The fragile supply chain is still recovering from the COVID pandemic.
Some analysts expect the effects of Trump's tariffs could be minimal thanks to a large backlog of inventory, but others worry one kink in the supply chain could have rippling effects.
In the meantime, Hamilton said, the uncertainty about what Trump will do and how other countries may respond is enough to kick off the disruption so many are worried about.
"No business — whether it's Boeing or (Brazilian plane manufacturer) Embraer or the mom-and-pop shop — no business can make planes with that kind of uncertainty hanging over their heads," Hamilton said.
Could consumers see the impact?
After announcing sweeping tariffs on dozens of countries, Trump paused most of them hours after they went into effect Wednesday. He still implemented a 10% blanket tariff and raised the tax on goods imported from China to a total of 145%.
China, a key market for Boeing's planes, on Friday announced it would raise its own tariffs on U.S. goods from 84% to 125%.
In February, Trump also announced a 25% tariff on aluminum and steel, two of the main metals used to build aircraft.
Trump claims the tariffs will bring more manufacturing and jobs to the United States, but economists warn they will raise prices and could spark a recession. Many in the aerospace industry worry they could increase the cost of airplanes and airplane parts because manufacturing in China, Vietnam and other countries in Southeast Asia is less expensive than doing the same work in the United States.
"If you're reshoring to the U.S., ... you're going to see an increase in costs," said Mark Norton, the executive director of the Northwest I-90 Manufacturing Alliance, which works to help manufacturers along Washington and Idaho's I-90 corridor.
"Somebody's going to have to eat that (cost), and I don't think it's going to be" large manufacturers like Boeing and Airbus, Norton said. "That's going to trickle to the consumer."
The industry isn't used to navigating tariffs. It's been operating mostly duty-free for decades after a 1980 trade agreement. In March, a group of 15 aviation groups asked federal officials to consider an aerospace exception from the tariffs to minimize the disruption to the supply chain.
What's at stake for Boeing?
Boeing expects it will have some cushion to soften the immediate blow of the tariffs. It has a large inventory of airplane parts and a large backlog of airplane orders, giving Boeing suppliers and customers flexibility, Chief Financial Officer Brian West said at a Bank of America conference last month.
Boeing buys 80% of the components it needs to build commercial planes from U.S. sources, and 90% of its military spending is based in the U.S., West said. Most of its aluminum and steel is also from the U.S., he continued.
"We think we've got enough room to breathe," he said.
But Boeing could still feel the impacts of a disrupted supply chain. Airplane parts could be delayed, "stuck sitting at borders or held in strategic facilities," analysts from RBC Capital Markets wrote in an investor note this week.
West acknowledged at the conference in March that "what we do worry about is availability of parts because this is a broad, complicated supply chain and people have different levels of exposure to it." To mitigate the impact, West said "we're working like heck to stay close to our suppliers."
If Boeing's suppliers and, consequently Boeing, have to raise prices, the manufacturer risks losing ground to European rival Airbus, though analysts are split on how likely it is that airline customers switch their orders due to the tariffs.
Aengus Kelly, the CEO of aircraft lessor AerCap, said in a March CNBC interview that he expected a 25% tariff would raise the cost of Boeing's 787 by $40 million.
"Customers won't take it," Kelly said. "The airlines will say 'We can't afford the airplane. We'll call Airbus.' "
In the worst-case scenario, that would leave Boeing with the U.S. market, about 20% to 25% of the global market, and "Airbus will end up with the rest of the world," Kelly said.
Hamilton, from Leeham News, said Boeing has three times more aircraft subject to tariffs than Airbus, which has a factory in Mobile, Ala. Airbus only has to worry about tariffs on products heading to the U.S., while Boeing has to worry about all of its international customers.
Hamilton predicts Airbus will deliver 793 planes to U.S. customers during Trump's time in office. Boeing, on the other hand, will deliver 2,170 planes to global customers.
The tariffs could also affect Boeing's march to recovery as it works to restore its reputation and production rate after an in-flight safety incident in January 2024 and recover from a two-month Machinists strike in the fall. Boeing has spent the past year making changes to its production process and culture.
Now, "none of this helps Boeing's recovery," Hamilton said.
Matthew Akers, an analyst from Wells Fargo, had a more optimistic view. Boeing is in "good shape" to weather this, he said, noting that it can rely on a $21 billion stock sale in October to provide some financial cushion and temporarily prop up suppliers if needed.
Akers was concerned about the possibility of tariffs disrupting the supply chain or sparking a recession that would ultimately lower demand but didn't expect the levies to increase the cost of Boeing's planes.
Only 10% to 15% of Boeing's expenses are exposed to tariffs, Akers estimated in an April investor note, leading to a 2%-3% cost increase for most aircraft. That's not enough of an incentive for airlines to switch manufacturers and risk a delay in delivery, Akers said in an interview.
"If you're an airline somewhere in the world, are you going to cancel and get in line at Airbus?" he said. "There's nowhere else to go."
Will the China feud disrupt the industry?
Even if the 90-day pause on tariffs for most countries will ease some strain on the aerospace industry, the escalating trade war with China will take a toll.
China is the "next biggest single market" for Boeing after the U.S., Hamilton from Leehman News said. China's airlines once operated more MAX planes than their U.S. competitors did. That relationship changed after tariffs instituted during Trump's first administration and deadly MAX crashes in 2018 and 2019.
Now, Hamilton estimates China's airlines have somewhere between 140 and 200 orders for Boeing planes scheduled through 2027. Boeing's website lists 130 unfilled orders slated to go to China, and analysts predict a chunk of Boeing's 762 unidentified orders are also headed there.
Akers, from Wells Fargo, said Boeing may "shuffle" its deliveries, hoping to delay fulfilling those orders headed to China until there is more clarity on the tariffs, or, ideally, some relief. China's Juneyao Airlines is reportedly delaying delivery of a Boeing 787 Dreamliner due to the tariffs, Bloomberg reported Friday.
What about Washington's economy?
With roughly 77,400 workers — accounting for $11.3 billion in wages and generating $57 billion in business revenue in 2023 — the aerospace industry is considered by those in it to be the backbone of Washington's economy.
Boeing accounts for 80% of those jobs and 82% of industrywide revenue, according to a 2024 report from the Seattle Metropolitan Chamber of Commerce. But Washington's aerospace supply chain includes companies — small and large — whose work ranges from engineering to research to maintenance to crafting tooling, interiors and composites.
The Pacific Northwest Aerospace Alliance, a nonprofit that supports aerospace companies in the region, estimates there are 500 companies directly tied to the aerospace supply chains in Washington.
Those smaller suppliers are likely to feel the greatest effects of the tariffs, said Norton, from the Northwest I-90 Manufacturing Alliance.
"The Boeings and the Amazons of the world can look at alternatives for their supply chain. Small and medium businesses ... they don't have the resources to go out and find other suppliers," Norton said.
On top of that, the region and the nation don't have the skilled workforce they would need to deliver on Trump's goal of bringing more manufacturing jobs to the United States, Norton said. The aerospace industry has already struggled to train the next generation of labor needed to meet demand.
But Norton said some local companies might benefit from the tariffs. It could give them a cost advantage over international rivals and it would give domestic companies extra incentive to hire U.S.-based companies.
Norton said at least one unnamed supplier has already fielded inquiries about their capacity to take on new work.
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