Tariff impact manageable for commercial aero; Boeing exposure limited: Wells Fargo

Investing.com -- Wells Fargo (NYSE:WFC) analysts believe the newly announced import tariffs will have a limited impact on Boeing (NYSE:BA) and the broader commercial aerospace sector. 

While the additional costs are expected to be modest, potential supply disruptions and recession risks remain concerns.

"We estimate new import tariffs imply 200-300 bps added cost for a Boeing aircraft, potentially higher on 787," Wells Fargo notes. 

However, the firm does not expect this to significantly hurt demand, though it advises monitoring for "signs of supply disruption or recession demand slowdown."

Boeing's supply chain composition helps mitigate the tariff impact. According to Wells Fargo, "60-70% of costs are in the supply chain, and it recently said ~80% of commercial aero supply chain is U.S.-based." 

The bank explained that this means only about 10-15% of Boeing’s total costs are exposed to international tariffs, resulting in an estimated 2-3% cost increase for most aircraft. 

The 787 program, which has a higher proportion of international suppliers, could see a larger impact, with Wells Fargo estimating a "7% 787 tariff hit."

The analysts also suggest that suppliers will likely pass tariff costs along, though "perhaps not 1:1 and not in real time." 

While near-term margin pressure could emerge, "aftermarket/spares suppliers will be better able to adjust price in the near term in order to recapture any cost added by tariffs," according tot he bank.

Looking ahead, Wells Fargo sees limited risk of major order cancellations, citing ongoing aircraft shortages and Airbus' backlog. 

However, broader macroeconomic risks remain. "Fears of recession have returned following the tariff announcement," Wells Fargo warns, adding that a downturn could still weigh on aerospace stocks, despite low current production rates.