The growing trade tension between the US and Brazil has emerged as a potential threat to Embraer's commercial aircraft sales, despite lack of details, despite the unknown that Brazilian air forces are affected by US President Donald Trump's latest tariff Salvo.
After a relatively quiet few weeks on the trade front, Trump is again rattling global markets with the threat of ratcheting tariffs on trading partners, including the threat of placing a 50% obligation on products imported from Brazil.
This is a big jump from the 10% “baseline” tariffs Trump unilaterally imposes on most countries in the world where Brazilian companies have won prices on financial plans.
Brazil's Louise Inacio Lula da Silva preferred a diplomatic resolution over Trump's threat to raise tariffs on August 1, but said that Brazil would impose a mutually 50% tariff on US goods if adopted.
Unless Brazilian aerospace products exemptions are engraved, promoting tariffs of up to 50% could raise the prices of regional jets for US customers. Whether these costs can be passed to the airline remains an open question.
Embraer told FlightGlobal on July 10 that it will “assess the potential impact on operations after the US government's announcement regarding the possibility of increased tariffs on Brazilian products.”
“The company is evaluating whether the new measures will have a particular impact on Brazil's aviation industry.”
The expected hits in Embraer's revenue will be reported on August 5th in a second quarter revenue call. Air Flammer said it is “actively involved with relevant authorities seeking to recover zero import tax in the aviation sector.”
The sale of the E2 series of the US Embraer will sell large narrow body jets that are not as strong as they would like – in part preventing US pilots from operating aircraft of that size, particularly the E175-E2, so the recent revival of interest in the first generation E175 has been key to the company's continued success in North America.
End of the first quarter – Embler has not released the latest numbers yet. Almost 95% of the E175's 160-unit corporate order backlog came from US carriers, including American Airlines (90), Republic Airlines (40), SkyWest Airlines (16), and Horizon (5).
That percentage has also increased. Skywest secured orders for the 60 E175 at the Paris Air Show last month, and earned the right to buy on 50 more aircraft. The Utah-based carrier already operates 263 jets.
Asked to comment on the developing situation, SkyWest says, “Many things can change, and it's too early to say.”
“SkyWest continues to assess the macroeconomic environment and adjusts accordingly,” it says.
The American, whose E175 ordered its operation by its local subsidiary Evingoy Air, did not respond to FlightGlobal's request for comment.
If higher tariffs are enforced, the airlines have little choice left. None of them tastes particularly good considering there is a complete lack of alternatives to the E175 built in the US or in other markets.
US operators had to absorb a 10% increase in Embraer Jets from the initial baseline tariffs.
