MercoPress. South Atlantic News Agency

Embraer likens Trump's tariffs to Covid-19 slowdown

Embraer has the potential to purchase US$21 billion in US equipment for the aircraft over the next five years, Gomes explained

Brazillian aircraft manufacturer Embraer, the third-largest in the world behind Boeing and Airbus, estimated that the tariffs announced by the United States against Brazil could have an impact similar to that of the Covid-19 pandemic, when the company saw a 30% drop in revenue and had to reduce its workforce by around 20%.

 According to Embraer, the tariff hike is expected to increase the price of each aircraft sold to the US by around R$50 million (US$9.01 million). Considering the period up to 2030, the impact could mean R$20 billion (US$3.6 billion) in tariffs. According to company CEO Francisco Gomes Neto, the change in aircraft prices is expected to lead to order cancellations, delivery postponements, production plan revisions, a drop in cash generation, and reduced investments.

“There is no way to reallocate orders from US customers to other markets. There is no way to reallocate these orders. Airplanes are not commodities. The largest market for executive aircraft is in the United States. There is no way to reposition this to other markets,” Gomes said in an interview.

Exports to US customers account for 45% of the company's commercial jet production and 70% of its executive jet production. According to the CEO, the 50% tariff could make it impossible to sell aircraft to the United States. “A 50% tax rate is almost an embargo. It's not just for Embraer, it's for any company. Fifty percent makes exports to any country difficult or unfeasible. It is a very high rate. And for aircraft, it is even more impactful due to the high added value of the product,” said Gomes Neto.

The tariff on Brazil will also affect US producers, and this could help in a possible negotiation, said Embraer's executive director. According to him, over the next five years, until 2030, Embraer has the potential to purchase US$21 billion in US equipment for the aircraft produced by the Brazilian company. “That's why we think a negotiated solution is possible,” he also said.

“We went there [to the United States] to show them this. They understand this, but they want to see bilateral negotiations moving forward, as they are seeking in several other countries,” he added.

Gomes Neto expressed confidence in an agreement between Brazil and the United States, similar to the recent agreement announced by the Americans and the United Kingdom, with the return of zero tariffs for the aeronautical sector.

“There were concessions on both sides, and in the case of the aerospace sector, the rate was 10%. We are optimistic about the situation, and this example of the agreement between the United Kingdom and the United States is a good basis for Brazil as well,” he added. (Source: Agencia Brasil)