Opinion: Transatlantic Tensions Head For Le Bourget

The specter of transatlantic decoupling haunts this year’s Paris Air Show. Two upcoming events, the NATO summit in the Netherlands on June 24-25 and the Trump administration’s threatened imposition of 50% tariffs on EU imports on July 9, are casting dark foreshadowings over Paris. Those two events present risks—and for some, opportunities—for both the military and civil sides of the aerospace industry.

The NATO summit might see an even worse version of the U.S.-Europe rift that marred the Munich Security Conference in February. In Munich, U.S. officials, led by Vice President JD Vance, criticized European domestic politics and highlighted profound differences between the U.S. and Europe on backing Ukraine against Russia. The NATO summit could produce more doubt about the U.S. military’s European presence and the future of U.S. support for Ukraine.

Part of the industry sees a strong upside to this decoupling. Europe, now on notice about possibly facing Russia alone and filling capability gaps left by U.S. pullbacks, is not only ramping up defense spending, but also emphasizing European industrial capabilities. The stock prices of U.S. defense companies have done reasonably well this year, but European defense stocks are setting impressive all-time records.

As a result, U.S. defense contractors face diminished prospects in Europe and supercharged European competitors in export markets. European companies should demonstrate a new level of confidence at Le Bourget. They also will be promoting non-U.S. systems on the basis that the U.S. is a less reliable security partner.

It is hard to believe, but just a few months ago, the Trump administration was threatening the territorial sovereignty of several allies. That is not good for weapon sales. Canadian Prime Minister Mark Carney recently told the CBC: “Seventy-five cents of every [Canadian] dollar of capital spending for defense goes to the United States. That’s not smart.”

These headwinds also affect U.S. suppliers. Given the risks of U.S.-EU decoupling, U.S. system- and component-makers can expect fewer opportunities on new platforms in Europe (and elsewhere), such as the Global Combat Aircraft Program or NATO’s Next-Generation Rotorcraft Capability program.

Second, tariffs imposed by the U.S. against Europe will result only in losers. Trump’s threatened July tariffs, to be implemented under the International Emergency Economic Powers Act (IEEPA), are on uncertain legal ground. But the administration has also announced a Section 232 trade investigation focusing on commercial aerospace. This would take longer to result in tariffs but would not be subject to the same legal challenges as IEEPA tariffs. Either way, despite the U.S.’ $80-plus billion trade surplus in aerospace, the administration seems to want to change the situation.

Such change can only be for the worse. If the tariffs are imposed in July or after the Section 232 investigation is concluded, retaliation will be inevitable. Indeed, EU officials have made it clear that retaliation against Boeing in particular is likely. Since the U.S. has an aerospace trade surplus with Europe, it is hard to see how this would not backfire, with slower growth and lower profits.

The risks of military and economic decoupling between the U.S. and its allies are intertwined. Some European countries might try to smooth over trade tensions with the Trump administration by making high-profile purchases of U.S. defense equipment, but most will likely view a buildup of domestic capabilities as the best way to derisk from economic and political shocks. In the event of a trade war, nothing would keep the EU from imposing tariffs on U.S. defense equipment in retaliation for U.S. tariffs and to help European defense companies.

Tensions between the U.S. and the Western alliance threaten the strong historical strategic and economic ties between them. But the U.S. cannot completely decouple from Europe and Canada—supply chains are simply too enmeshed and cultural links too deep.

It is also notable that, despite numerous scares since Trump took office, the U.S. is still in NATO and still has troops in Europe, the cutoff of U.S. support for Ukraine proved temporary, and bellicose talk against Canada and Greenland has come to nothing. There is no trade war between the U.S. and any Western country. Indeed, investors are profiting from market rebounds whenever Trump backs away from his aggressive trade moves.

But it has only been five months, with 43 of his 48-month term to go. And Le Bourget will be followed directly by two events that may prove pivotal, not just to the industry but to the Western alliance.