by Carlos Garcia, Financial Controller

Why Aviation is Uniquely Vulnerable to US tariffs

In today’s global economy, tariffs can be financial disruptors and not just political tools. For companies like AMP, the impact of U.S. tariffs is felt in every invoice, shipment, and sourcing decision. Tariffs directly influence the cost of doing business. In capital-intensive sectors like aviation, even small percentage changes can result in millions of dollars in added expenses for customers and suppliers.

The aviation industry is uniquely vulnerable to these shifts. Aircraft manufacturing, maintenance, and MROs rely on a complex, international supply chain that spans continents. From aluminum sourced in Canada to avionics from Germany and composite materials from Asia, the sector’s dependence on imported goods makes it highly sensitive to trade barriers. When the U.S. imposed 25% tariffs on steel and aluminum imports in early 2025, the effects rippled across the industry. For companies in the aeronautical supply chain industry, this meant a 12–18% increase in landed costs for key components.

The Real-World Effects

These cost increases are not isolated. Major suppliers have reported price hikes of up to 15% on structural parts, as well as flagged rising maintenance and fleet acquisition costs in their earnings reports. At AMP, we continually review and monitor all market conditions to ensure compliance with contracts with U.S.-based airline clients, many of whom are now demanding greater transparency and flexibility in pricing models.

The effects extend deep into the supply chain. To hedge against future tariff hikes, some companies have been forced to increase inventory levels of high-risk components, which has tied up working capital and driven up storage costs. Delays at customs have disrupted the just-in-time delivery model, forcing companies to build in more lead time and buffer stock. This has affected airline customers too, who now face longer turnaround times for maintenance and repairs.

How to Navigate Aviation’s Tariff Turbulence

To deal with this new reality, companies need a smart, multi-pronged financial strategy. Key approaches include:

• • 1. Expand foreign exchange hedging to stabilize procurement costs.
  • 2. Accelerate reshoring by investing in domestic manufacturing to reduce tariff exposure.
  • 3. Adopt dynamic pricing models in contracts to adjust to fluctuating costs in real time, building trust with partners.
  • 4. Diversify suppliers into regions like Latin America and Eastern Europe, which may offer more competitive pricing and less tariff exposure.

Internally, AMP has established a cross-functional task force that includes finance, procurement, ops, and tax experts to monitor trade developments and model their financial impact. We also partner with external trade consultants to develop sourcing strategies and rapid-response capabilities.

Market Implications and Strategic Agility

The Market is watching these developments closely. Investor sentiment in the aviation sector has become increasingly sensitive to trade policy signals. The recent tariff escalation has already triggered a 4% dip in the Aerospace & Defense Index (SPSIAD) until April 2025, and analysts are warning of further volatility if retaliatory measures intensify. However, since April 4, 2025, trust and confidence have recovered, and on May 12, the highest levels of the index were reached.

What’s clear is that the relationship between suppliers and customers, especially within the U.S., is being redefined. MROs and airlines are leaning more heavily on domestic suppliers, not just for reliability but for tariff insulation.

In this new environment, financial agility is no longer optional, it’s a competitive advantage. For AMP, that means staying ahead of policy shifts, managing risk proactively, and maintaining open lines of communication with both suppliers and customers. The skies may be turbulent, but with the right strategy, we can still chart a steady course.

AMP’s Proactive Stance

AMP has been actively navigating these challenges, especially in the Aviation Supply Chain Management. The recent zero-tariff deal between the U.S. and the EU on aircraft and components is a perfect example of a positive shift we’re leveraging.

We implement strategies like diversifying sourcing and using dynamic pricing models to help partners manage costs and maintain operational stability. We’ve also expanded our role in the resale and distribution of aircraft consumables and expendables (C&E), ensuring critical items are always available.

By staying informed and responsive, we help clients adapt quickly to new policies and evolving market conditions. No matter how fast they change.