Tough talk on tariffs

opinion

by Alasdair Whyte

March 13, 2025

When President Hoover introduced the so-called Smoot-Hawley Tariff Act in 1930 there was absolutely no impact on business jet imports. Hoover did not use social media to announce his tariff plans.

President Trump’s 25% tariffs on imports from Canada and Mexico are already affecting aircraft transactions.

“There is a lot of misinformation out there and misunderstanding,” said Tobias Kleitman, president, TVPX. “The question is what happens in April after this current period? We’re at a point where there are people who have entered into agreements to buy airplanes that are subject to tariffs, what do they do?”

Kleitman was speaking on a special Corporate Jet Investor Town Hall (which you can watch here) on Friday 7th March.

The new tariffs came into effect at one minute past midnight on Tuesday March 4th. Automakers managed to negotiate an extra month’s grace. Late on Thursday night the president changed them saying that they will not apply until April 2nd for goods that are covered by an existing agreement. This trade deal between the US, Mexico and Canada – often referred to as USMCA – covers aircraft. Anyone looking to close aircraft deals involving Canadian aircraft now has a brief window.

“What people need to understand is the trigger for the tariffs is the country of manufacture, not the country where it’s coming from. It’s not just new, it’s used,”said Kleitman.

If an aircraft has already been imported into the US, tariffs should not apply. A pre-owned Challenger that was imported by a US owner in the past can be sold to a US buyer without any issue. As can a Pilatus aircraft that was owned by a Mexican owner. But things get more complicated if an aircraft has been imported and exported.

There will also be issues with components that are made in Mexico and Canada.

“The potential impacts of components getting tariff treatment is going to increase costs and overall if these tariffs do stick around the business aviation marketplace will be constrained both in the US and outside,” said Ehsan Monfared, partner at Canadian firm YYZLaw.

Jonathan Epstein, a partner at Holland & Knight added that now may be the time to change documentation. “We have got a lot of questions about purchase agreements. If you add a 25% tariff it changes the agreed to bargain. So, thinking about creatively going forward, when you make your force majeure clause include a material change in tariffs, rather than putting the duty on either party.”

He also stresses that buyers of aircraft need to make sure they have been imported correctly.

Things could also get even more complicated. “I don’t think Europe will be safe from tariffs. I mean Canada and Mexico are the US’s closest trading partners. Canada’s trade imbalance to the US is largely owed to the fact that Americans buy a lot of crude oil from Canada and so if you take that out of it we are actually net consumers of American-produced products. So, if we’re not safe from the pen stroke, I don’t see why Europe would be,” said Monfared,.

All three agreed to come back in one month. In fact, this email may already be out of date by the time you have read this far.