A New Flight Path: U.S.-China Trade De-Escalation and the Aerospace Supply Chain Turnaround

The recent thaw in U.S.-China trade tensions has sent shockwaves through global aerospace markets, with the reinstatement of GE Aerospace's engine exports to China's Commercial Aircraft Corporation (COMAC) signaling a pivotal shift. This partial de-escalation, tied to reciprocal concessions on rare earths and industrial goods, has reinvigorated the prospects for COMAC's flagship C919 narrowbody and C909 regional jet programs. For investors, the move represents more than a temporary reprieve—it's a window into strategic opportunities in a sector where supply chain resilience and geopolitical calculus are increasingly intertwined.

The De-Escalation: A Lifeline for COMAC's Programs

The U.S. Department of Commerce's decision to lift export restrictions on GE's LEAP-1C engines (for the C919) and CF34-10A engines (for the C909) in June 2025 has been a game-changer. These engines, produced by CFM International (a GE-Safran joint venture), are not just components—they are existential to COMAC's aircraft. Without them, C919 production would grind to a halt, delaying its FAA/EASA certification and undermining China's ambition to compete with Boeing and Airbus.

The image below underscores the stakes: the C919, now nearing certification, embodies China's aerospace ambitions. Its success hinges on uninterrupted supply of U.S. engines and avionics.

The de-escalation also eases pressure on COMAC's C909 regional jet, which relies on the CF34-10A for propulsion. While China's indigenous CJ-1000A engine is years from certification, the temporary revival of U.S. exports buys time—and keeps global buyers engaged.

Implications for Global Aerospace Competition

The U.S.-China truce highlights a paradox: even as tensions linger, interdependence remains a reality. For GE Aerospace, the resumption of exports to COMAC bolsters its revenue streams at a time when mature markets like the U.S. face slower demand. Meanwhile, COMAC's survival as a credible rival to Boeing and Airbus hinges on sustained access to Western technology.

The stakes extend beyond engines. COMAC's reliance on Honeywell and Collins Aerospace for avionics systems—critical for international certification—means further de-escalation in other sectors could accelerate the C919's global rollout. For now, though, the six-month limit on China's rare earth exports to the U.S. underscores the fragility of this truce.

Investment Opportunities: Riding the Aerospace Turnaround

The lifting of export controls has already sparked optimism for GE Aerospace. Investors should monitor its stock performance, as sustained exports to COMAC could offset headwinds in legacy programs like the 737 MAX.

Key areas for investors to watch:
1. C919 Certification Timeline: A successful FAA/EASA certification by end-2025 would validate COMAC's technical capabilities and unlock orders from global carriers.
2. Supply Chain Diversification: Firms like Safran (CFM's partner) or Honeywell, which provide critical systems to both U.S. and Chinese programs, stand to gain.
3. Regional Jet Growth: The C909's entry into service could capture demand in Asia-Pacific, challenging Bombardier and Embraer.

Risks and the Long Game

Despite the de-escalation, risks remain. U.S. restrictions on advanced semiconductors and AI tools persist, complicating China's broader industrial ambitions. Moreover, the CJ-1000A's delayed certification means COMAC's long-term independence is still years away. Investors must balance near-term optimism with the reality that geopolitical volatility could reignite.

Conclusion: A Strategic, Not Permanent, Win

The U.S.-China aerospace detente is a tactical win for GE and COMAC—but a fragile one. For investors, the opportunity lies in firms exposed to the C919's commercial success and the regional jet market's growth. However, portfolios should remain diversified, with hedges against renewed trade conflict.

In aviation, as in geopolitics, the skies are never truly clear—but the path forward, for now, is navigable.

Investment Takeaway: Consider long-term positions in aerospace suppliers like GE and CFM International partners, while maintaining caution on pure-play China aerospace equities until the CJ-1000A's timeline solidifies. Monitor rare earth trade dynamics and certification milestones for critical catalysts.