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IAM urges Trump to meet with unions on tariff impacts

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Tariffs could disrupt aerospace supply chain, raise costs

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Bombardier shares drop amid tariff uncertainty, planning

challenges

By Allison Lampert

Feb 3 (Reuters) - The United States should pause tariffs

on Canada as it did on Mexico, the head of the largest North

American aerospace union told Reuters on Monday, as industry

executives weighed the impact of fresh duties on plane parts and

jets.

U.S. President Donald Trump announced executive orders that

would impose tariffs of 25% on Canadian imports and 10% on goods

from China starting on Tuesday. Trump had planned a 25% tariff

on Mexico, but that was delayed after a Monday call with

Mexico's president.

"I would think they would do the same thing for Canada,"

said Brian Bryant, international president of the International

Association of Machinists and Aerospace Workers (IAM), which

represents workers at planemakers such as Boeing ( BA ).

"We just have so many jobs in the U.S. that export aerospace

goods to Canada for their programs up there and we wouldn't want

to see those jobs jeopardized by that."

Bryant said Trump should meet with unions such as the IAM to

hear workers' views. Some IAM members voted for Trump and

probably did not envision "that their jobs are going to be

impacted by the potential of what he might do with tariffs," he

said.

Tariffs would add complexity and higher costs to planemaking,

with a tight supply chain limiting firms' ability to find

alternative parts. Canada exported C$12.8 billion ($8.78

billion) of aerospace and defense-related products to the U.S.

and imported C$10.2 billion worth, according to 2023 government

data.

Bombardier shares tumbled as much as 13% before paring

losses to around 2%. The Canadian business jet maker said in a

statement it will use the coming days to analyze multiple

scenarios to avert fallout.

The tariffs' duration is unclear and Trump's penchant to shift

quickly makes planning for such scenarios more difficult. A

trade war would hurt aerospace's sprawling supply chain at a

time when Boeing ( BA ), a key U.S. exporter, is trying to boost plane

production following lower 2024 output.

Boeing ( BA ) has $87.5 billion in inventory from suppliers and

aircraft parts are exempt from tariffs under a 1979 treaty that

includes the U.S. and Canada, although it is not clear if that

agreement would prevent Trump from imposing tariffs on the

sector.

Aerospace products and planemaking materials steel and

aluminum are targeted by Canada for a second round of

retaliatory tariffs in three weeks.

PASSING ON COSTS

Companies that buy aluminum from Canada to make sheets and

plates or extrusions for seat racks would likely have no choice

but to pass on costs to planemakers, analysts said.

Boeing ( BA ), European rival Airbus, which also produces

jets in Canada and the United States, and suppliers RTX

and Honeywell ( HON ) declined to comment.

"The likely outcome will be price increases," said Frederic

Loiselle, a co-founder of Montreal-based private equity firm

Thrust Capital Partners, which specializes in small aerospace

firms. "There is no capacity to turn to and if it was easy to

put in place, the industry would have settled its supply chain

issues long ago."

Loiselle said some of Thrust's companies had been buying

aluminum parts ahead of Trump's weekend tariff announcements.

The business jet sector would be hard-hit if tariffs

persist, said U.S. aerospace analyst Richard Aboulafia. RTX's

Pratt & Whitney Canada produces engines for some business jet

models from General Dynamics' ( GD ) Gulfstream Aerospace and

Textron ( TXT ).

Dak Hardwick, vice president of international affairs at the

U.S. trade group Aerospace Industries Association, said tariffs

on Canada and Mexico could change the "positive trajectory" that

has made the U.S. a top aerospace exporter.

($1 = 1.4585 Canadian dollars)