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A&D: Initial Look at Tariff Impact
Matt Woodruff, CFA - Head of Aerospace & Defense/Transports, CreditSights
Arda Tirnakli - Analyst, Aerospace & Defense/Transports, CreditSights
EXECUTIVE SUMMARY
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President Trump has announced tariffs of 25% on goods from Canada and Mexico and 10% on goods from China, with retaliatory measures anticipated. In the first eleven months of 2024, the US exported $10.6 billion worth of civilian aircraft, engines, equipment, and parts to Canada and Mexico. While aircraft purchase contracts typically include cost escalators tied to inflation, they don’t explicitly account for tariffs.
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Currently, the impact of tariffs on Canada and Mexico appears more manageable compared to the automotive sector. Canada has a strong aerospace presence, including Pratt Canada small engine manufacturing, parts of Pratt & Whitney Large Commercial Engines, and Bell Commercial Helicopter operations, while Mexico also contributes to the industry. Companies are expected to disclose their estimated tariff impacts over time.
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