The CEO of Brazilian planemaker Embraer has warned that tariffs could be as damaging as the pandemic.
Donald Trump has threatened a 50% levy on Brazilian exports from August 1, unhappy with criminal charges against former president Jair Bolsonaro, who is accused of trying to stage a coup.
It would be a huge obstacle for the world’s third-biggest planemaker.
Around three-quarters of Embraer’s business jets and nearly half of its regional airliners are delivered to US clients.
“Given the relevance of this market, we estimate that if this [Trump’s tariff plan] moves on at this magnitude, we will have an impact similar to that of COVID-19 in terms of the decline in the company’s revenue,” CEO Francisco Gomes Neto said, per Reuters.
The firm’s share price has fallen 8.5% in the past five days, but is still up more than 25% since the start of the year.
Reuters reported that Gomes Neto also said that shipping Embraer’s E175 jets, which play a major role in regional aviation, would become “unfeasible” with tariffs.
He also reportedly emphasized that the tariffs would be damaging to the US as well, given that it supplies parts like engines and avionics.
“It’s a lose-lose situation,” said the CEO.
Tariffs have already caused problems for aviation’s two dominant players: Boeing and Airbus.
The American planemaker had to return some 737 Max jets from China when Chinese airlines declined to accept them after tariffs soared above 100% between the two countries.
However, the two sides did reach a truce, and Boeing has resumed deliveries to China.
Meanwhile, US airlines have been trying to find ways around Trump’s 10% levy against the European Union.
Ed Bastian, the CEO of Delta Air Lines, said on an April earnings call that the carrier would not pay tariffs and would instead defer aircraft deliveries.
Instead, a Delta Airbus A350 left the planemaker’s headquarters in Toulouse, France, and flew to Japan. So long as the jet is used exclusively for international flights, it may mean it never counts as being imported to the US.
Most top players in the aviation industry oppose the threat of tariffs, as the industry relies on complex global supply chains.
Some relief was found at last month’s Paris Air Show, when Transportation Secretary Sean Duffy said he backed a return to a 1979 agreement for no tariffs in aviation.
While the UK won tariff exemptions for aircraft parts and Rolls-Royce engines later in June, it is unclear whether similar exemptions will be made available for everyone.
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