India Halts $3.6 Billion Boeing Jet Deal After Trump's 50% Tariff Hike

·  India halts $3.6B Boeing deal over soaring costs following Trump’s 50% tariff hike.

·  25% U.S. import tariffs on Indian components blamed for cost surge in aircraft procurement.

·  Air India begins retrofitting legacy Dreamliners in the U.S. with upgraded three-class cabins.

India has apparently placed a temporary suspension on a $3.6 billion agreement for the purchase of Boeing aircraft after U.S. President Donald Trump imposed significant 50% tariffs. Approved by the U.S. State Department in 2021, the agreement had sought to purchase six more Boeing P-8I maritime patrol aircraft at a cost of $2.42 billion. But growing inflation, supply chain bottlenecks, and the recently imposed tariffs have escalated the project's cost by as much as 50%.

Sources in the defence industry indicate that the new 25% tariffs imposed at the start of August have greatly escalated the price of components and parts, several of which originate from or are manufactured in India. The new costs have been passed on to purchasers  in this instance, the Indian government  causing a strategic rethink of the agreement.

Although the Ministry of Defence has not issued a formal statement, various reports suggest that the halt is to balance the effects of increasing expenditures, geopolitical changes, and India's focus on strategic autonomy.

Also Read- India Hit with 50% US Tariff Over Russian Oil, Lifeline for Pharma Sector

Why Have Costs Skyrocketed?

The supply chain for the P-8I aircraft involves Indian-made components that are now under U.S. tariffs. This has increased manufacturing cost for Boeing, thus raising the overall cost for the Indian buyer.

Air India Starts Boeing 787-8 Retrofitting in the US

In parallel, Air India has begun retrofitting its older Boeing 787-8 Dreamliner fleet in the United States. The initial aircraft is being worked on at a Boeing plant and is scheduled to come back during year-end, after certification.

Air India operates a fleet of 33 Dreamliners  26 older 787-8s and 7 newer 787-9s. After the initial retrofitted plane returns, the airline will continue to send two planes each month for the same upgrade.

The new cabin configuration will be three-class: 20 Business Class, 25 Premium Economy, and 205 Economy seats, with the aim of optimizing passenger experience throughout the fleet.