Bombardier CEO Worries US May Retaliate if Canada Drops F-35 Deal

Trade Tensions Threaten Aerospace Giant’s US Contracts / Reuters

Bombardier CEO Eric Martel has voiced serious concerns over potential US retaliation against the Canadian aerospace company if Canada cancels its $13.30 billion deal to purchase 88 Lockheed Martin F-35 fighter jets. With Canada currently locked in a heated trade war with the United States, the government is reevaluating this massive military contract, prompting fears that Bombardier’s lucrative US contracts could be at risk. Martel shared these worries with reporters in Montreal following a speech at the Canadian Club, highlighting the intricate ties between Canada’s aerospace industry and its southern neighbor. As trade tensions escalate, the stakes are high for Bombardier, a key player in the global private jet market with significant operations and supply chains in the US.

The $13.30 billion F-35 deal, originally finalized in 2023, is now under scrutiny by Canada’s new Prime Minister, Mark Carney, who has ordered a comprehensive review citing a “changing environment.” This shift comes amid US President Donald Trump’s aggressive trade policies, including a refusal to exempt Canada from broad steel and aluminum tariffs and a pledge to impose additional reciprocal and sectoral tariffs starting April 2. Canada’s Defense Ministry has already committed funds for the first 16 F-35 aircraft, with deliveries expected soon, yet the review opens the door to alternatives like the Saab Gripen, raising questions about the deal’s future. Martel acknowledged the prime minister’s rationale, stating, “I am there to defend Bombardier, but I understand why the new prime minister is asking these questions.” However, he emphasized the potential fallout, noting, “Effectively, we could be targeted. This is my concern.”

Bombardier’s exposure to US retaliation stems from its deep integration into the American market. In October, the Montreal-based company delivered its eighth jet to the United States Air Force as part of a $465 million contract for aircraft equipped with specialized communications platforms. This deal, part of Bombardier’s growing defense division, underscores its reliance on US partnerships. Additionally, the company operates a major division in Wichita, Kansas, and maintains an extensive US supply chain, making it vulnerable to any punitive measures Washington might impose. The fear is that scrapping the F-35 deal could be perceived as a hostile move, prompting the US to target Bombardier’s contracts in retaliation, especially given Trump’s threats of 25% tariffs on all Canadian imports not covered by the United States-Mexico-Canada Agreement (USMCA).

The broader trade war adds layers of complexity to this scenario. Canada has responded to US tariffs with its own 25% duties on over $20 billion worth of American goods, including steel, aluminum, and adhesives, effective earlier this month. This tit-for-tat escalation, coupled with Trump’s unpredictable trade rhetoric, creates an uncertain environment for cross-border industries like aerospace. For Bombardier, the risk is not just theoretical; Martel pointed out that if US tariffs extend to jet deliveries, the company could pivot by prioritizing non-US clients, a strategy mirroring European rival Airbus. Yet, he remains cautiously optimistic, suggesting that any tariffs on Bombardier’s planes are unlikely to persist long-term and may not apply to the US-made components in its business jets, potentially softening the financial blow.

Despite the current steel and aluminum tariffs, Martel noted their minimal impact on Bombardier’s costs, thanks to the company’s strategic sourcing and production adjustments. However, the looming threat of broader tariffs or contract cancellations keeps the stakes high. The integrated nature of the North American aerospace sector means that Bombardier’s fate is tied to both Canadian policy decisions and US responses. With the USMCA’s exemptions for Canadian goods set to expire on April 2 unless extended, the uncertainty surrounding trade rules further complicates Bombardier’s planning. Martel’s comments reflect a delicate balancing act: defending his company’s interests while navigating a politically charged trade landscape.

Adding depth to this issue, Bombardier’s role in the US defense market is not limited to the Air Force contract. Its defense unit converts business jets into military aircraft, including surveillance planes, expanding its footprint beyond commercial aviation. This diversification strengthens Bombardier’s position but also heightens its exposure to US policy shifts. The company’s Wichita facility and US supply chain could serve as leverage in negotiations, yet they also make it a potential target if relations sour further. Analysts suggest that Canada’s review of the F-35 deal, while pragmatic amid trade tensions, risks unintended consequences for firms like Bombardier, whose cross-border operations blur the lines between ally and adversary in this economic standoff.

For now, the F-35 deal remains in limbo, with Canada weighing its options as trade talks with the US loom. Martel’s concerns highlight a broader truth: the aerospace industry, often seen as a symbol of technological collaboration, is not immune to the fallout of geopolitical and economic rivalries. As Bombardier braces for potential US retaliation over the Canada F-35 deal cancellation, its leadership is preparing for multiple scenarios, from tariff adjustments to contract reprioritization. The outcome of Canada’s review, expected to conclude in the coming months, will likely shape Bombardier’s US strategy and test the resilience of Canada-US aerospace ties in an era of renewed protectionism.