Welcome to my latest video presentation, posted January 1. The global aviation industry faces turbulence as Donald Trump vows to launch a comprehensive trade war in 2025 when he regains the White House. This looming conflict threatens to reshape the international economic landscape, with significant consequences for the aviation sector.
The base values and lease rates for specific aircraft models would get dampened by a trade war. The prospect of geopolitical conflict already is getting priced into values and lease rates.
Impact on the Boeing-Airbus Duopoly
Central to this dynamic is the duopoly of Boeing and Airbus, and China’s emerging aerospace champion, the Commercial Aircraft Corporation of China (COMAC). The interplay among tariffs, global supply chains, and economic growth will define the challenges and opportunities for these and other aviation players worldwide.
Boeing and Airbus dominate the global aviation market. Both manufacturers rely on intricate, interdependent supply chains that span the globe.
According to Aviation Week Network, Boeing and Airbus represent 66% of the market today. By 2025, they’re projected to manufacture a combined 76%, or three out of every four new aircraft, with COMAC gaining 1% of the market.
But make no mistake, Trump’s tariff bluster has raised concerns among other aerospace companies, such as Canada-based Bombardier. Indeed, Trump has taken pains to antagonize America’s neighbor in the north; Bombardier and Pratt & Whitney Canada are bracing for the fallout.
Tariffs targeting high-value exports such as aircraft, avionics, and sophisticated technology would severely disrupt aircraft supply networks, increasing costs and reducing competitiveness.
In the long-running rivalry between Airbus and Boeing, European-based Airbus has been taking the lead in deliveries, as this chart shows. Boeing’s safety lapses and withering regulatory oversight have diminished demand for its aircraft. Airbus has been capitalizing on Boeing’s stumbles.
The once-mighty Boeing also has been losing money, whereas Airbus has been turning a profit. Boeing’s stock price has nosedived as well, which is ironic because management’s focus on profits, the share price, and stock buybacks motivated the cost-saving production shortcuts that got the company into trouble in the first place.
The Airbus-Boeing duopoly is in a volatile period, making it ripe for a Chinese challenger. China’s leader, Xi Jinping, has made the creation of a domestic aircraft manufacturing industry a top national priority.
As an American company, Boeing would bear the brunt of U.S.-imposed tariffs, particularly if China retaliates with levies on American aircraft. Historically, China has been one of Boeing’s largest markets.
However, Chinese imports from the U.S. are already shifting away from high-value products like aircraft and toward commodities such as crude oil. Tit-for-tat tariffs would accelerate this trend in 2025, further eroding Boeing’s market share in the critical Asia-Pacific region.
Economic Growth and the Asia-Pacific Region
The aviation industry is intrinsically linked to global economic growth. Trade wars tend to stifle economic activity, reducing demand for air travel and, by extension, new aircraft. The Asia-Pacific region, the fastest-growing aviation market, would be disproportionately affected.
Over the next two decades, from 2024-2043, passenger traffic in the Asia-Pacific region is expected to grow at a rate of 5.5% per year. The main reasons for this are the growth of the middle class, which is more likely to travel; rapid urbanization; and expected economic growth.
In addition, the accelerated retirement of older and less efficient fleets will result in the Asia-Pacific region demanding more than 17,000 new aircraft, both passenger and cargo.
In a region where more than 55% of the world’s population lives, economies such as China, India and even Vietnam and Indonesia are expected to be the main drivers of growth in the region.
Declining trade volumes and economic uncertainty would curtail expansion plans for airlines in this region, weighing on demand for new aircraft.
Several aircraft models are particularly vulnerable in a trade war scenario:
China’s state-backed aerospace manufacturer, COMAC, has ambitious plans to challenge the Boeing-Airbus duopoly with its C919 jetliner. However, the C919’s development heavily relies on Western technology. Key components are sourced from the U.S. and Europe. A trade war could restrict access to these critical technologies, stalling COMAC’s progress and diminishing its global competitiveness.
Despite these challenges, COMAC might benefit from increased domestic support. In the face of escalating tariffs, China could prioritize homegrown solutions, providing subsidies and fast-tracking certification processes for the C919. However, this strategy would be insufficient to offset the loss of access to Western expertise, leaving COMAC vulnerable.
Modern aircraft manufacturing relies on deeply integrated supply chains. A trade war targeting aerospace would expose these vulnerabilities, particularly for high-value components.
A prolonged trade war could accelerate existing trends, such as China’s pivot toward commodities and away from high-value imports like aircraft. This shift would undermine both Boeing and Airbus, forcing them to compete more aggressively in other markets. Simultaneously, China’s efforts to localize its supply chains could gain momentum, albeit at significant cost and with limited success in the near term.
Ultimately, a trade war would undermine the interconnectedness that underpins modern aviation. For the aviation sector, the stakes are sky-high, and the turbulence ahead could reshape the industry for years to come.
The upshot: in a trade war, nobody wins.
Editor’s Note: For the latest data on base values and lease rates pertaining to aircraft mentioned in this article, read the forthcoming issue (dated January 13) of Aircraft Value News.
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