Report: U.S. aerospace a trade winner, but tariffs threaten future exports

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U.S. aerospace and defense sales generated $143 billion in exports and a positive trade balance of $86 billion, according to a new report by the Aerospace Industries Association.

WASHINGTON — The United States’ aerospace and defense industries have been in a bit of a slump over the past few years, but they continue to deliver strong trade numbers compared to other sectors of the economy.

U.S. aerospace and defense in 2017 posted a positive trade balance, says a new report released Wednesday by the Aerospace Industries Association. “While the U.S. experienced the third largest trade deficit on record, our industry generated $143 billion in exports and a positive trade balance of $86 billion, effectively reducing the U.S. trade deficit by 10 percent.”

The latest industry sales data is dropped amid escalating trade tensions in the wake of the Trump administration’s move to impose tariffs on imported metals and other goods. AIA President and CEO Eric Fanning has warned that a protracted trade war could hurt aerospace sales, U.S. jobs and the nation’s economy as countries affected by these tariffs fire back in retaliation.

“We agree with President Trump that trade should be fair. And we fully support efforts to protect the intellectual property rights of American companies,” Fanning said in a statement to SpaceNews. But he cautioned of possible unintended consequences. “The aerospace and defense industry is essential to America’s national and economic security, and having access to global markets and supply chains through trade allows U.S. manufacturers to stay competitive.”

U.S. aerospace in 2017 accounted for 9 percent of all U.S. goods exported. “We are concerned that the sustained imposition of tariffs will not address concerns about current trade dynamics and overcapacity in steel and aluminum, and instead will present a disruptive threat to our industry’s export competitiveness,” Fanning said. “We will continue to encourage bilateral and multilateral negotiations to address trade differences and secure free, fair and sustainable trade.”

U.S. aerospace and defense generated $865 billion in economic output in 2017. That is a drop of one percent, or $8.5 billion, from 2016, and of 2.1 percent from a decade-high of $883 billion in 2012. The aerospace and defense positive trade balance of $86 billion is the largest of any U.S. exporting sector. The report noted that the industry’s workforce of 2.4 million people represents nearly 20 percent of the nation’s manufacturing ranks.

Screen Shot 2018-07-11 at 10.35.07 AM“Looking to the future, all signs point to 2018 being an even stronger year than 2017. The industry’s commercial aerospace segment is set to increase manufacturing output. And the increased investment levels for NASA and the Department of Defense under the 2017 Congressional Omnibus will only further improve the outlook for manufacturers in the industry’s defense and space sectors,” AIA projected.

As measured in gross exports, the aerospace and defense industry ranked third, behind electronic products and the coal and petroleum sectors and ahead of exports from the motor vehicles, chemicals, machinery and agricultural sectors.

The industry’s largest export destination in 2017 was China, which accounted for $16.3 billion, or 11.5 percent of total industry exports, followed by France, the United Kingdom, Canada and Germany. By industry subsector, U.S. commercial aerospace exports were led by China, France and the United Kingdom, while exports of military systems were led by Saudi Arabia, Australia and Japan.

Europe was the largest destination for U.S. aerospace and defense exports accounting for 36 percent, or $50.8 billion, followed by the Asia-Pacific, the Americas, the Middle East and Africa.

Screen Shot 2018-07-11 at 10.33.52 AMThe space-focused portion of the industry is on a growth curve, the AIA report noted. It accounted for $41 billion of the $865 billion output for 2017.

Space sector growth was driven by both launch vehicle and satellite production — 29 vehicles flew in 2017 , seven more than in 2016; and 268 U.S. manufactured spacecraft were delivered to commercial and government buyers —184 more than in 2016.