GKN Aerospace is scrambling to assess the impact of U.S. tariffs on its global supply chain, and it may soon take mitigation measures that could include boosting manufacturing on the other side of the Atlantic from its UK headquarters. The aerostructures and engines group’s CEO, Peter Dilnot, told attendees at a press briefing in London on Thursday that the current 10% base rate tariff is “unwelcome” and could be extremely disruptive to an aerospace supply chain that is already facing significant difficulties.
Dilnot told reporters that he has executives working to establish exactly how the Trump Administration tariffs will apply in practice and what exemptions might be available. “Then you have to look at where you [as a company] sit in terms of contractual liabilities [with customers], what mitigation actions you could take, and then decide what you need to do in terms of your supply chain,” he explained.
GKN is considering multiple options, such as changing shipping routes for components and parts. “We need to keep serving our customers well but without being out of pocket,” Dilnot said. “But there are lots of unknowns over the rates and the possibility of retaliatory tariffs [imposed by other countries on the U.S.].”
According to Dilnot, aerospace manufacturers could also take a hit from indirect tariff impact, such as if commercial airline flight hours decline in the wake of a global recession. He warned that some smaller companies, currently earning margins below the 10% level, may struggle to survive.
Demand Still High, for Now
“But overall, the demand levels and backlogs are strong, even if these tariffs are extremely unhelpful,” he concluded, just under two weeks before GKN reports its next set of financial results on April 30.
Dilnot said that in the four years since GKN was acquired by Melrose Industries, the company has made good progress with its restructuring efforts. “We’ve reshaped the business to add most of the value around design, rather than just manufacturing,” he said, maintaining that it is now well placed to reap dividends from risk and revenue sharing programs in both civil and military sectors.
GKN has manufacturing and aftermarket support facilities in the Northeastern U.S. and in Alabama and California. It employs several thousand Americans at these facilities.
Along with other aerospace groups, GKN is lobbying U.S. officials to seek wider exemptions for the industry. On April 9, President Donald Trump temporarily placed all countries apart from China on a 10% tariff for a 90-day period, while subsequently increasing the rate for China to 145%. GKN has joint venture operations in China with government-owned Comac.