The global aerospace industry has become an intense battleground as geopolitical strife, trade disputes, and shifting alliances redefine the sector’s competitive landscape. While Boeing and Airbus have long dominated commercial aviation, the industry is being reshaped by growing European assertiveness, American unpredictability, and China’s rising ambitions.
The Trump administration’s foreign policy has disrupted traditional alliances, prompting European retaliation and opening doors for China’s state-backed aerospace ambitions. These dynamics are influencing aircraft demand, base values, and lease rates in ways that could have lasting consequences for the industry.
The Fracturing of the Western Alliance
Since the end of World War II, NATO and the transatlantic alliance have provided a framework for Western security, fostering a stable environment for aerospace and defense industries.
However, President Donald Trump’s alignment with authoritarian leaders, including Russian President Vladimir Putin, has undermined traditional Western unity. His open hostility toward NATO, coupled with a withdrawal of American support for Ukraine, has forced European nations to reassess their defense priorities.
As a result, Europe has accelerated its push for greater military autonomy. The European Union and its member states are significantly increasing defense expenditures, investing heavily in indigenous aerospace and military programs.
Europe’s plan to increase defense spending is poised to boost the Continent’s combined economy. Analysts estimate that an increase of defense spending in the European Union from just under 2% percent to 3.5% of gross domestic product (GDP) would cost around 300 billion euros annually.
This sum would generate a similar amount of additional economic activity. The EU’s suggested increase in spending could result in 0.9% to 1.5% GDP growth, which is highly favorable considering that the bloc’s aggregate GDP grew by only 0.9% in 2024.
The shift in U.S. priorities has led to retaliation against U.S. aerospace firms, with European governments steering contracts away from Boeing and Lockheed Martin in favor of Airbus and European defense contractors.
America’s Reliability Under Scrutiny
Further exacerbating global uncertainty is the erosion of confidence in U.S. leadership. Recent scandals, such as a journalist inadvertently gaining access to a national security conference call, have amplified concerns over White House mismanagement. America’s increasingly transactional foreign policy has further alienated traditional partners.
Trump’s tariffs are expected to adversely affect U.S. economic growth. U.S. tariffs, particularly those targeting essential raw materials like aluminum and steel, will undermine the U.S. economy by increasing production costs, fueling inflation, and stoking trade tensions with key partners.
As aerospace manufacturing heavily relies on these materials, tariffs will drive up expenses for companies like Boeing and suppliers throughout the industry, eroding profit margins and making American aircraft less competitive globally.
Furthermore, retaliatory tariffs from other nations could restrict U.S. aerospace exports, reducing demand for domestically produced aircraft and potentially leading to job losses.
With international competitors like Airbus and the Commercial Aircraft Corporation of China (COMAC) poised to capitalize on these disruptions, protectionist trade policies risk weakening the U.S. aerospace sector and its long-term global dominance.
These trends have made European nations hesitant to rely on the U.S. for aerospace and defense procurement, reinforcing the pivot toward European and alternative suppliers.
China’s Bid for Aerospace Supremacy
Amid the Western divide, China is rapidly expanding its aerospace capabilities. The state-supported COMAC has intensified its challenge to the Boeing-Airbus duopoly.
The C919, COMAC’s narrowbody competitor to the B737 and A320, is a key part of China’s strategy to capture market share, particularly among domestic airlines and emerging global partners looking to reduce dependence on Western manufacturers.
That said, COMAC’s customer base is currently dominated by Chinese airlines and leasing companies, largely due to strong government backing and policies favoring domestic carriers. However, this is set to change as COMAC aggressively expands its global presence.
The C919 has already garnered interest from international carriers, particularly in developing markets seeking alternatives to Western aircraft. COMAC is also leveraging strategic partnerships, financing incentives, and diplomatic ties to penetrate regions like Southeast Asia, Africa, and parts of Latin America.
China’s aerospace ambitions are further fueled by Trump’s trade war, which has disrupted global supply chains and strained economic relations. As U.S. foreign policy isolates traditional allies, China is leveraging its economic power to build strategic partnerships, offering incentives to countries willing to adopt COMAC aircraft. This trend threatens Boeing’s international market share at a time when the company is already weakened by regulatory setbacks and corporate turmoil.
The Impact on Boeing and Airbus
For Boeing, these geopolitical developments come at a particularly vulnerable moment. The company continues to grapple with the aftermath of the 737 MAX crisis, production delays, and regulatory scrutiny. The uncertainty surrounding U.S. foreign policy only exacerbates its struggles, as European and Asian customers increasingly look to Airbus as a more stable and reliable partner.
Conversely, Airbus is emboldened by the shifting landscape. With Europe investing heavily in its own defense and aviation sectors, Airbus stands to gain at Boeing’s expense.
European solidarity in response to geopolitical instability is strengthening Airbus’s position in military and commercial aviation. This is reflected in growing order books for Airbus’s A320 and A350 families, as well as its expanding influence in global defense contracts.
Aircraft Base Values and Lease Rates
The intersection of these global trends is also affecting aircraft valuations. With European defense spending on the rise and Airbus gaining market share, demand for Airbus models is increasing, bolstering base values and lease rates for aircraft like the A320neo and A350-1000.
Meanwhile, Boeing’s uncertainty is causing some investors and lessors to reevaluate their exposure to Boeing assets. If geopolitical instability continues to erode confidence in Boeing, lease rates for its aircraft could face downward pressure, particularly in international markets where confidence in U.S. policies is wavering.
Conclusion
The aerospace industry is at a turning point. The fracturing of traditional Western alliances, China’s aggressive push into the market, and Boeing’s internal struggles are realigning global aviation. Airbus is capitalizing on these disruptions, while Boeing faces a turbulent future exacerbated by shifting geopolitics and its own regulatory woes.
Meanwhile, China’s aerospace ambitions are no longer a distant threat but an emerging reality.
Note: This article is an edited transcript of the video presentation. The video contains greater details and several charts.
