US tariffs could have pandemic-like impact on planemaker Embraer, CEO says

[SAO PAULO] The 50 per cent tariff that US President Donald Trump plans to impose on Brazilian exports starting in August could hammer the revenue of planemaker Embraer like the Covid-19 pandemic did, its CEO warned on Tuesday, flagging risks to US partners.

Francisco Gomes Neto told reporters the tariffs would amount to a trade embargo on the regional jets it supplies to US airlines and could trigger order cancellations, deferred deliveries and tough consequences for Embraer’s US suppliers.

Sao Paulo-listed shares in Embraer, which had risen 3 per cent earlier in the day, seesawed during his remarks, lost the gains before ticking back up 0.6 per cent. They have fallen around 10 per cent since Trump announced the tariffs, but are still up 33 per cent so far this year.

The US is the main market for Embraer, the world’s third-largest planemaker after Airbus and Boeing, with US clients buying 45 per cent of the firm’s commercial airliners and 70 per cent of its executive jets.

Analysts had warned that the Brazilian planemaker would be one of the most affected by the tariffs.

“Given the relevance of this market, we estimate that if this (tariff plan) moves on at this magnitude, we will have an impact similar to that of Covid-19 in terms of the decline in the company’s revenue,” Gomes Neto said.

In 2020, when the pandemic ground air travel to a halt, Embraer’s revenue plunged around 30 per cent from the previous year.

Gomes Neto emphasised that the tariffs would also hurt US suppliers of components such as engines and avionics.

“It’s a lose-lose situation,” he said.

Aircraft are among the top US imports from Brazil, along with oil, steel,coffee and orange juice.

Embraer forecast the levies would generate an additional cost of around US$9 million per airplane exported to the U.S., with potential impacts totaling around 2 billion reais (S$463 million) this year.

Shipments of E175 narrowbodies, a workhorse of US regional aviation, would become “unfeasible” by the tariffs, Gomes Neto noted, adding that no order had been canceled so far.

“It’s a very new situation, so everyone is trying to understand this process and working toward reaching a solution within the deadline,” the CEO said.

In March, Embraer’s E175 backlog included 90 firm orders from American Airlines, 40 from Republic, and 16 from SkyWest, which placed a fresh order in June for another 60 jets. REUTERS