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Embraer escaped Trump's tariff blitz with flying colors

E mbraer avoided a major revenue hit on Wednesday, when U.S. president Donald Trump exempted aircraft from the higher tariffs he imposed against many Brazilian products.

Embraer, along with its U.S. partner companies, argued that Trump's 50% tariffs would disrupt local businesses and deliveries. They also argued that Embraer's Brazilian jets were essential for regional flights within the United States.

Four airline officials said that U.S. carriers privately asked the Trump administration to exempt Brazilian aircraft exports from higher tariffs. Envoy Air Piedmont Airlines Republic Airways and regional carriers Envoy Air and Piedmont Airlines wrote to the Commerce Department expressing concerns.

Francisco Gomes Neto, CEO of Embraer, rushed to meet several high-ranking officials in the Trump administration. He told Valor Economico that among those officials were Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick.

The main argument was simple: Embraer is a major employer in the U.S. and the largest aviation market in the world has no substitute for the E175 jetliner.

This is the only jet produced today that meets the clause in labor agreements which prohibits planes with a weight of more than 86,000 pounds or 76 seats to be flown on regional routes.

Embraer is awaiting the delivery of 200 E175 aircraft to U.S. carriers including American Airlines Group SkyWest Alaska Air Group Republic. U.S. customers also purchase 70% of its executive aircraft.

SkyWest warned analysts in a conference call last week that they were not willing to pay for a tariff of 50% on new aircraft deliveries. They planned to work together with Embraer, and other partners, to delay the deliveries until the situation is resolved.

Alaska said that it may also consider delaying deliveries.

Analysts labelled Embraer as the main beneficiary of Trump’s exemptions after relief was received on Wednesday. This decision pushed Embraer's Sao Paulo traded shares up by more than 20% since their Wednesday lows.

JPMorgan wrote in a client note that "given this news, JPMorgan expects Embraer to reach new highs."

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Gomes Neto stated earlier in the month that the impact of tariffs on Embraer could be similar to the COVID-19 Crisis, where Embraer saw its revenues fall by 30% and reduced its workforce around 20%.

As Trump threatened levies, the Brazilian government was most concerned about the planemaker. Sources familiar with the situation said that Brazilian officials asked Washington to exempt Embraer aircraft from the tariffs.

Embraer tried to convince Trump that the United States would also benefit from a reprieve. The company emphasized that it had approximately 3,000 employees in Brazil and its final assembly lines of executive jets are located there. 1 market.

Embraer's aircraft are equipped with a large number of parts from the United States, including General Electric engines. The company estimated in a report earlier this month that it could purchase up to $21 billion of U.S.-made products between now and 2030.

In a Wednesday statement, Embraer praised Trump's decision. It said that the decision confirmed the positive impact of the Brazilian economy and the strategic importance to the U.S.

The 10% tariff will remain in place for Brazilian products. The firm stated that the tariffs were harmful but manageable and pledged to continue advocating for zero-tariff policies.

SkyWest stated that due to the E175's U.S.-made components, the actual levies would be between one third and half of 10%.

Last week, American Airlines, one of its major clients, expressed optimism about the resolution of the situation. In an interview conducted last week, CFO Devon May said that a tariff rate of 50% did not make any sense.

He said: "I believe the administration understands Embraer's importance to North American carriers, and to our economy. So hopefully we can get to a more favorable position there."

Robert Isom, CEO of Embraer, told analysts in a conference call that he had made sure the company and its administration were aware of their interests. Reporting by Gabriel Araujo, in Sao Paulo; David Shepardson, in Washington; Lisandra Paraguassu, in Brasilia; Tim Hepher, in Paris and Rajesh Kumar Singh, in Chicago. Editing by Manuela andreoni, Rosalba o'Brien.

(source: Reuters)