The aviation industry can breathe a sigh of relief after dodging tariffs in Trump's EU trade deal

Donald Trump departing Air Force One.Anna Moneymaker/Getty ImagesThe aviation industry won't face tariffs thanks to the newly announced EU-US trade deal.Aviation's global supply chain and international reach mean tariffs would be particularly painful.Airlines and planemakers have spent months preparing workarounds in the event of tariffs.The EU-US trade deal includes a significant win for aviation after months of fears that the industry would face punishing tariffs.At April's "Liberation Day" announcement, Donald Trump initially imposed a 20% tariff on all exports from the European Union. Since negotiations have only seen that lowered to 15%, the deal is largely being seen as a win for the US.However, some European companies, like Airbus, still have reason to be cheerful because aircraft and their components are facing zero tariffs.The aviation industry has faced a nervous few months of waiting, given its reliance on a highly complex and global supply chain — already under huge strain since the COVID-19 pandemic.Optimism was already boosted at last month's Paris Air Show when Transportation Secretary Sean Duffy said he favoured returning to a zero-tariff agreement from 1979, in line with much of the industry's top players.Meanwhile, planemakers and airlines have been devising creative ways to avoid Trump's levies.For example, Delta Air Lines deployed a similar tactic from a past US-EU trade war.In May, the airline had an Airbus plane delivered to Japan instead of the US. So long as the jet was only used for international flights, it wouldn't be officially imported to the US, so there would be no tariffs to pay.The Irish budget airline Ryanair, Europe's biggest carrier by passengers, was also preparing ways to limit the impact.CEO Michael O'Leary said in an earnings call last week that, even though its deals with Boeing made the planemaker responsible for paying fees, the airline was willing to help find ways around it. He suggested registering planes in the UK, which also faces no aviation tariffs, or even delaying some deliveries.However, the concerns aren't over for everyone yet.While reaching a deal makes the future of the economy more predictable, many companies are expected to pass the costs of tariffs onto consumers.That could therefore see travel demand further falter as people find themselves with less money to spend.In its second-quarter earnings last week, American Airlines reported record revenue but lowered its profit forecast. It predicts adjusted earnings per share between a loss of 20 cents and a profit of 80 cents, down from profits between $1.70 and $2.70 issued in January.But CEO Robert Isom said he was more optimistic about demand given growing GDP and trade-deal progress."I think that all lends to a customer that's more willing to get out there and spend on travel and do some things that they want to do," he said.Read the original article on Business Insider

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