Introduction

Aviation leasing / financing has always been dependent on cross-border flows of aircraft assets and capital. Geopolitical tensions and evolving trade dynamics have escalated this year and continue to impact practically on the sector. In particular, tariff escalations in the US, China and (potentially) the EU adds complexity to long term investment decisions for aircraft lessors, operators and investors. So what is the current state of play and how should aircraft lessors be thinking about this now?

Leasing into the US

Under the US tariff framework introduced in April 2025, a 10% tariff applies to the lease of certain aircraft imported into the United States[1]. The tariff’s application hinges on two key questions:

1. Has the aircraft been imported into the US before?
   • If the aircraft is being imported for the first time; or if it is re-imported more than three years after a prior export; a tariff becomes payable.
2. Is the aircraft considered a “US aircraft”?
   • A “US aircraft” is defined by its principal place of manufacture, predominantly applying to Boeing aircraft. If the aircraft is classified as a US aircraft, the new tariff does not apply.

The tariff is assessed as a lump sum based on the “value of the lease”. However, there is no clarity on how the “value of the lease” should be calculated in this context. This is a significant point of uncertainty (and discussion) at present.

Clearly, such a tariff fundamentally changes the economics of a deal for lessors and operators alike. This is also a significant issue for manufacturers outside the US such as Airbus. US airlines such as Delta have warned that (in the absence of mitigation or aircraft exemptions) this could lead to cancellations of certain Airbus aircraft orders. Airbus has some manufacturing capability in the US (Alabama) which could theoretically insulate some deliveries from US tariffs. In practice however, where the aircraft parts are coming from outside the US for assembly in the US; tariffs are generally still applicable on parts.

Leasing into China

The lease of aircraft into the Chinese market has also become more complex in 2025; particularly with respect to US aircraft (namely Boeing). The US and China agreed to reduce reciprocal tariffs on each other’s products in June; having been as high as 145% earlier this year. At the time of writing, China was imposing an additional tariff of 10% on all US goods imported into its territory[2]. Unlike the US, tariffs in China applicable to a lease are (in general) collected on the lease rental itself; not a lump sum. This means that changes in tariff rates can impact on aircraft already imported. There are certain exemptions for certain aircraft parts and so the practical implementation of the tariffs will need to be monitored.

What about the EU?

The EU has been in active trade discussions with the Trump administration for several months. To date, the EU have only flagged specific EU retaliatory tariffs on certain US goods (not including aircraft). However, the EU Commission recently warned of additional countermeasures if the US increases tariffs on EU goods to 30% later this year. It remains to be seen whether this results in an EU-US trade deal or some form of escalation on tariffs and trade policy. Developments here are also critical for the leasing community; for example where a lessor intends to place a new US (Boeing) aircraft with an EU airline.

Practical Impact

In 1979 the World Trade Organisation supported the signing of the “Agreement on Trade in Civil Aircraft”. It was signed by over 30 countries and provided for duty-free trade of aircraft and parts. Recent developments on tariffs outlined above (while not specific to aircraft) certainly take a step back from such multilateral cooperation. So what are the practical implications for lessors?

• Economic Impact – tariffs (on aircraft or even raw materials such as steel) increase the cost of aircraft production which impacts directly on the supply chain. This could ultimately impact on the profitability of airlines (the lessors’ customers).
• Increased uncertainty – as noted above this is fast moving and trade policies / discussions are ongoing. Even outside the regulatory landscape, the practical implementation of tariff policies by customs officials will need to be monitored carefully.
• Legal Impact – where tariffs do arise; who is liable? The lessor, the airline, the manufacturer? From a regulatory perspective this will depend on the jurisdiction and the specific transaction / background facts. However, the relevant legal documentation (purchase & sale agreements, lease agreements etc) may also impact practically on who ultimately bears the costs. So vigilance will be important in this regard even more so than before.
• Documentation – in a more active tariff / customs environment, completing accurate and full documentation and ensuring good record keeping is critical. As noted above, there may be scenarios where new tariffs apply to existing leases. Certain exemptions may also depend on previous importation within a certain time-frame; reinforcing the importance of accurate and comprehensive documentation.