(Corrects spelling of Optima president’s name in paragraph 3)
By Allison Lampert
MONTREAL (Reuters) – Canadian helicopter parts supplier Optima Aero is already moving inventory south of the border to minimize the risk from potential tariffs proposed by U.S. President Donald Trump.
Optima, headquartered in Quebec, sends about $2 million worth of parts each year to Texas, where its local division provides maintenance services for local law enforcement and U.S. border protection, a priority mission for Trump’s administration.
“A tariff on Canada would make it tough to keep that business,” said Optima President Toby Gauld, who estimates 6% of the Montreal-area company’s $32 million in annual revenue could be subject to tariffs.
Trump is threatening 25% duties on imports from Canada and Mexico starting on Feb. 1.
From repositioning parts to stocking up on materials such as steel and lobbying for tariff exemptions, aerospace suppliers are scrambling to limit tariff risk to their bottom lines. The tariffs, if implemented, could raise costs for already-stressed suppliers and their planemaking customers, such as U.S.-based Boeing.
GE Aerospace CEO Larry Culp said on Thursday the company is doing contingency planning and has been in frequent contact with the Trump administration.
Some aerospace and defense executives have proactively sought tariff exemptions from the administration, according to one aerospace industry source and one source in Trump’s transition team.
Reuters contacted nine aerospace suppliers in Canada and the United States, seven of which said they could be harmed if tariffs are imposed, adding that they have limited options without passing costs on to customers.
The White House was not immediately available for comment.
COMPLEX WEB
The aerospace industry consists of a sprawling network of global suppliers, making targeted tariffs difficult to implement without major disruptions to plane and helicopter makers.
Canada is the U.S.’ top import country and third-largest export country for aerospace by dollar value, according to the Aerospace Industries Association. Canadian manufacturers produce engines for General Dynamics Corp’s Gulfstream and Textron, as well as landing gear for Boeing and Airbus.
Boeing and suppliers Honeywell and Pratt Canada parent RTX declined comment. Textron’s CEO and Airbus’ Canadian division said they are waiting for tariff specifics.
Canada exported C$12.8 billion ($8.91 billion) of aerospace and defense-related products to the U.S. and imported C$10.2 billion worth, according to 2023 government data. Canada has threatened retaliatory tariffs if targeted by Trump.
Some analysts and industry executives doubt Trump will impose blanket tariffs on Canada given the negative economic impact on the U.S. Even if tariffs are imposed, aerospace may not be a top priority, analysts say.
“It would be incredibly complicated,” said Alex Krutz, managing director of aerospace advisory Patriot Industrial Partners, who does not believe the sector will be affected.
Mexico, also threatened by U.S. tariffs, has fast-growing aerospace hubs in Queretaro and Chihuahua, attracting large suppliers including Honeywell.
Industry executives have warned that slapping tariffs on aerospace parts, now sold duty-free under a global agreement, would create fresh headaches for money-losing Boeing, but also for the company’s suppliers that have struggled due to the pandemic and the planemaker’s recent lower output.
The financial pressures limit small suppliers’ ability to defend against tariffs.
In Washington state, family-run supplier TNT Aerospace is trying to negotiate lower steel prices but cannot easily stock up due to inventory costs. President Aaron Theisen fears tariffs could raise prices of the metal.
“It doesn’t take a large piece of steel to cost a lot,” Theisen said.
US-CANADA TRADE
In Western Canada, heat treatment specialist Pyrotek regularly sends trucks from its British Columbia factory to Boeing’s planemaking hub near Seattle to pick up parts from suppliers.
The trucks return to Pyrotek’s Canadian factory near the border, where the company heat-treats the aluminum parts that it then returns to its mostly U.S. clientele.
“(Tariffs) would have an enormous effect,” said President Jim Matheson. “There’s no one who can build a plane alone from the ground up.”
Mitchell Aerospace, a Montreal-area supplier of aircraft parts, sends sand castings to the U.S. for hot isostatic pressing, a manufacturing step that the company cannot carry out in Canada, President Guillermo Alonso said.
The castings then return to Canada before Mitchell ships them to customers around the world, including U.S. enginemaker Pratt & Whitney.
Warren Maruyama, a former Republican general counsel of the U.S. trade representative, sees the introduction of tariffs as a real possibility since they were a core Trump campaign promise and could be introduced easily using presidential powers.
In 2021, the United States and European Union agreed on a five-year truce in a transatlantic tariff war triggered by a record trade dispute over aircraft subsidies at the World Trade Organization.
U.S.-made planes are likely targets for retaliation by foreign countries, Maruyama added.
“Aircraft is an iconic American product.”
($1 = 1.4362 Canadian dollars)
(This story has been corrected to fix the spelling of the Optima president’s name in paragraph 3)
(Reporting By Allison Lampert in Montreal. Additional reporting by Mike Stone and David Shepardson in Washington, Tim Hepher in Paris, Rajesh Kumar Singh and Mike Stone in Washington; Editing by Rod Nickel)
