Canadian aerospace groups warn fresh tariffs could raise costs on engine repairs, parts

By Allison Lampert

MONTREAL (Reuters) - Escalating U.S. tariffs and Canadian retaliatory duties could raise costs on items from aircraft components to engine repairs, according to aerospace trade groups in Canada, as a fresh round of the U.S.-led trade war looms.

U.S. President Donald Trump's administration is set to enact reciprocal tariffs on trading partners on April 2, widening a dispute that has already slapped 25% duties on steel and aluminum imports to the U.S., sparking retaliation from Canada.

While reports suggest some sector-specific goods would be excluded, counterstrikes are already being weighed, with Canada consulting domestic industries on proposed retaliatory tariffs on C$125 billion ($87.31 billion) of U.S. goods.

Melanie Lussier, president of the trade group Aero Montreal, said Canada's proposed counter tariffs cover certain U.S.-made items like sensors that would be difficult to source elsewhere, since parts must be certified to meet safety requirements.

Aerospace companies are set to discuss the prospect of being squeezed by duties from both countries at an industry supply chain summit on Tuesday in Montreal.

“It could be really catastrophic, a rise in costs, loss of productivity, a loss of competitiveness," Lussier told Reuters in an interview last week. "In the end, everyone will pay more, both Americans and Canadians and it’s the passengers who will suffer."

Lussier said Aero Montreal is not seeking an exemption to proposed Canadian counter duties but would like to see some U.S. products removed from the list.

Aerospace contributed nearly C$29 billion to Canadian GDP in 2023.

Finding counter-tariffs that hit the U.S. but avoid harming domestic industries has been a challenge. The European Union delayed 50% tariffs on U.S. bourbon, wine and toilet paper after Trump threatened 200% duties on European spirits.

New Canadian Prime Minister Mark Carney, who called a snap election on Sunday, has acknowledged there is a limit for dollar-for-dollar retaliation given Canada's smaller economy.

Canada's innovation ministry said the government is taking steps to mitigate the impact of countermeasures on Canadian workers and businesses and is considering requests for exceptional relief.

Despite closely-integrated supply chains, aerospace has generally not been hard hit yet due to long lead times on purchases and compliance with the United States-Mexico-Canada (USMCA) trade deal negotiated during the first Trump administration.

Bombardier's CEO said recently that existing U.S. tariffs on aluminum and steel, along with retaliatory measures introduced by Canada on items like those metals and adhesives, have had minimal impact on the Canadian business jet maker.

But AeroDynamic Advisory analyst Kevin Michaels warned tariffs on aluminum alone would cost the industry at least $500 million.

Existing tariffs, combined with fresh duties, could also raise costs on engine maintenance in North America, at a time when space at Maintenance, Repair and Overhaul shops is constrained by demand, the Aerospace Industries Association of Canada said.

“Current tariffs and any new tariffs imposed will provide additional costs for MRO providers in both Canada and U.S. and impact cross-border supply chains," said AIAC CEO Mike Mueller.

($1 = 1.4317 Canadian dollars)

(Reporting By Allison Lampert in Montreal; Editing by Bill Berkrot)