Embraer, the Brazilian aerospace company, has just obtained an exemption from the tariffs announced by the Trump administration on Brazilian goods. On July 30th, President Trump’s administration declared that, effective August 1st, 50% in tariffs would be added to a comprehensive package of Brazilian exports. However, through diplomatic outreach and established economic policy, Embraer obtains an exemption that prevents its commercial and executive aircraft from being subject to financial penalties from the increase.
In this post, we’ll discuss the extent of Embraer’s exemption, what aircraft the deal covers, and why it matters for companies on both sides of the equator.
Escaping from the Tariff Storm: Good News for Embraer’s Commercial Aircraft
The tariff declaration applies an additional 40% tax on top of existing levies, making Brazilian goods generally more expensive in U.S. markets. However, the U.S. government made a point of exempting civil aircraft, as well as aircraft parts and components, from the policy. Sources from the aerospace industry tell us that Embraer obtained an exemption from the White House after a concentrated campaign of negotiation, based on its importance to the U.S. regional jet fleet and local production.
This case closely resembles rulings against Airbus in the past. As trade war heat was turned up across the Pacific, American negotiators have regularly carved out large civil aircraft from punitive measures in order to avoid disrupting key supply chains and airline economics.
Saving the E175: A Key Player in U.S. Domestic Aviation
The biggest winner in the exemption is easily the Embraer E175-E1 regional jet, used extensively in the U.S. by regional airlines under the livery of major carriers like Delta, American, and United. Regional jets like the E175 fill a unique role in domestic aviation and keep passenger counts high at smaller airports that don’t get as much traffic as larger hubs.
Absent the tariff exemption, Brazilian-made aircraft and component sales would be much more difficult to justify, creating potential holes in regional coverage that could hurt smaller carriers and make their businesses unprofitable. Instead, Embraer obtains an exemption that will keep these workhorse jets in the middle of the U.S. market for the foreseeable future.
Gearing Up for the E2 Family and Praetor Jets
The exemption also applies to Embraer’s larger E-Jets E2 family and its line of Praetor 500 and Praetor 600 business jets. The E2 aircraft line is Embraer’s newest and most competitive lineup, which includes updated versions of its E190 and E195 jets. It gives Embraer a technological edge that places it head-to-head with Bombardier and Gulfstream in long-range, fuel-efficient executive aircraft.
Embraer has placed a significant emphasis on quality in recent years, creating aircraft that punch above their weight class in terms of range, fuel consumption, and payload capacity. The company has also been able to sell these aircraft at more competitive prices than traditional market leaders. The tariff-free ability to sell to the U.S. domestic market is a significant win that will allow the company to continue competing on performance even as the regional market fragments.
In another win for the company, Embraer obtains an exemption that will protect these and its most competitive models, too.
Made in Florida: Protecting Embraer’s North American Operations
Beyond Embraer’s aircraft portfolio, the tariff exemption also acknowledged the unique economic role that the company plays in the U.S. manufacturing industry. Embraer operates an assembly line in Melbourne, Florida, which produces the Phenom 100 and Phenom 300 light jets for the U.S. and international markets. This factory also serves as a high-skill employer for dozens of local workers in the region, tying itself to the aerospace and economic communities.
While the Phenom jets assembled at the Florida plant are technically made in the U.S., they use many high-end components that are still manufactured and shipped from Brazil. In addition to the aircraft themselves, these parts would have been subject to import taxes under the new tariffs, increasing the total manufacturing cost and driving up prices. However, Embraer obtains an exemption for its critical components and maintains a streamlined production for its U.S.-made aircraft.
Large Civil Aircraft: Traditionally Exempted from Trade Conflicts
Aerospace is also an industry that has shown a strong degree of continuity in the past, even during intense geopolitical flare-ups. It is common for major manufacturers and programs to be carved out of broad-based sanctions or tariffs. This practice is the direct result of the complex and global nature of the industry, with international supply chains stretching across hundreds of suppliers and subcontractors.
The United States government and Brazilian Embraer have been able to negotiate in a way that has produced this exemption, allowing all parties to avoid the kind of unintended blowback that broad sector tariffs have in the past.
In a savvy move, Embraer obtains an exemption in a high-stakes environment, which serves as a tacit recognition that aviation products should not be subjected to tariffs in the same way that other goods are treated.
The Missing Piece: Military Aircraft—Where Does It Stand?
Oddly, the new decree that levies these penalties does not have similar protections for military and defense-related aircraft. This could put additional pressure on sales and production of programs like the A-29 Super Tucano, which is manufactured in Florida by Embraer as part of an agreement with Sierra Nevada Corporation. Embraer’s C-390 Millennium transport aircraft could also be negatively affected by this program, due to its unique capabilities and design elements.
While Embraer’s military and commercial aircraft share limited areas of overlap, any future disruption to either segment’s manufacturing process, supply chain, or other factors could create future complications when making sales to the U.S. military or third-party countries.
In Conclusion: An Embraer Exemption with Room to Expand
In conclusion, Brazil’s Embraer obtains an exemption for itself and its aircraft from the steep tariffs placed on Brazilian goods and companies. This exemption is a major positive for the company’s business strategy, as it keeps Embraer’s aircraft competitive in price, its supply chains protected, and its existing commitments secure.
A major message from this ruling is that the current geopolitical environment is somewhat volatile and unpredictable. But, a physical and economic commitment to major markets like the United States can give companies significant political and diplomatic leverage, should trade or geopolitical conflict begin to escalate.
While it remains to be seen how Embraer and other major manufacturers and airlines will be affected by the larger U.S.–Brazil trade dispute, one thing is clear: Embraer obtains an exemption and buys itself some time in one of the most important markets for the company’s future growth.