Some in the private aircraft industry are running around with their hair on fire lamenting how Trump’s 25 percent tariff proposal will spell the end of the U.S. aerospace industry. We’ll let them keep doing that since they’re fun to watch, but there’s a glass-half-full story to share with everyone else.
For beginners, there’ll be less State of The Union “I will end private jet tax breaks” rhetoric as read off the teleprompter by the last Commander in Chief. Trump has been an active user of business aviation, both airplanes and helicopters, long before his political career. He and others in his circle already understand the benefits concerning time savings, improved productivity and security.
On the topic of taxes, shortly after this address the IRS began targeted IRS tax audits of business jet owners. Some saw it as going after low-hanging fruit since the cost of operation of an aircraft and the subsequent tax write-offs can be high.
However, others saw it as the weaponization of yet another government agency in response to the Inflation Reduction Act of 2022, the largest climate legislation in U.S. history. Funding examples included reducing carbon emissions (think business jets) and making large corporations and ultra-wealthy “pay their fair share”. Whatever the case, there stands to be a reevaluation of aircraft owner IRS audits after Trump takes office.
Other tax-related situations stand to get a second look. Bonus depreciation tax deductions, for example, have been steadily reduced on every year from what had been 100 percent. With a new administration, the hope of again returning to 100% is at least on the table. Likewise, the current proposal of increasing business aviation fuel taxes by a whopping factor of five could be reevaluated.
With the U.S. expected to pull out of the Paris Agreement, climate activism will moderate. One potential bizav benefit will be fewer protestors spray painting business jets orange and gluing themselves to the wing, and fewer stockholder ESG activists calling for a ban on private aviation.
New FAA and Transportation Secretary heads supported by the new administration would also be a plus for the industry. In addition, changes to current government hiring practices will provide a larger and better-qualified candidate pool to reduce workforce shortages such as air traffic controllers.
Back to the tariffs. Our excitable friends would indeed be correct that a theoretical 25 percent tariff across the board would have an adverse effect on business aviation. But what these gullible pundits don’t understand is that Trump’s negotiating style is to start with a high figure to extract the maximum leverage. Because he says 25 percent, or that Greenland, Canada and the Panama Canal will become part of the U.S., is simply an attention-getting device to set the stage for future negotiations.
Further, he wouldn’t allow General Dynamics’ Gulfstream to be saddled with tariff cost increases for using UK-based Rolls-Royce engines, or Cessna Textron and other U.S. aircraft manufacturers who use Pratt & Whitney Canada engines. This would not be in the spirit of putting America First to keep U.S. business jet makers competitive.
As such, engines and other critical high-value foreign content would almost certainly be exempt from tariffs or significantly discounted. Similarly, financially weakened Boeing would never be expected to pay more for its airliner sections built by its partners around the world.
The National Business Aviation Association (NBAA) states that “Business aviation means more than 1.2 million manufacturing and service jobs in the United States. It is part of a general aviation industry that contributes more than $150 billion to our economy each year and contributes positively to our nation’s balance of trade.” With this is mind, it would be counter-intuitive to believe it would be purposely weakened with excessive tariffs.
In all, it’s believed that the new administration will be more business aviation friendly bringing with it the possibility of an improved business environment. Tariffs will not be a one size fits all and there will strategic exclusions and discounts once the dust has settled.
For those still running around with their hair on fire over tariffs, maybe it’s time to stop, drop and roll.
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