Aviation and the Trump tariffs: clouds are darkening

Donald Trump's 90 day suspension of additional tariffs has prompted a stock market rally, but it does not dispel the uncertainty unleashed by his so-called "liberation day" announcement on 2-Apr-2025.

Moreover, most of the world's nations still face a base level tariff of 10% on their exports to the US, unprecedented in modern times. The average rate imposed by the US was 2.5% in 2024 and had not been double digit for eight decades.

Meanwhile, a full-blown trade war between the world's two largest economies is escalating. Mr Trump increased the tariff on China to 125%, while China has levied 84% on the US (update: now 125%, 11-Apr-2025).

For aviation, the outlook is deteriorating. Tariffs and trade wars do not boost economic growth. Risks of an economic slowdown, possibly a recession, are growing. Inflationary pressures and higher borrowing costs add to the uncertainties.

These economic concerns are likely to mean lower demand for air travel. Flag carriers/network airlines are likely to be hit harder, due to exposure to North America, premium cabins and cargo.