Paris Airshow 2025: A Strategic Crossroads for Defense Contracts and Transatlantic Trade

The 2025 Paris Airshow has emerged as a critical theater for both geopolitical maneuvering and corporate dealmaking, with U.S. lawmakers and defense contractors front and center. The event underscores a pivotal moment in transatlantic trade dynamics and defense spending, offering investors a window into where capital is flowing—and where risks lie.

The U.S. Delegation's Playbook: Alabama, Connecticut, and the Case for State-Level Aerospace Power

U.S. lawmakers attending the Airshow, including Senator Katie Britt and Rep. Mike Rogers (Chairman of the House Armed Services Committee), are leveraging the event to amplify their states' aerospace credentials. Alabama's delegation, led by Commerce Secretary Ellen McNair, is showcasing companies like SEA Wire and Cable and Alabama Aerospace, aiming to attract $4 billion in investments over the next decade. Connecticut's focus on its $6.6 billion aircraft engine sector, spearheaded by Gov. Ned Lamont, highlights the strategic importance of regional hubs in a globalized industry.

For investors, this state-level advocacy signals a shift in U.S. economic strategy: states are now direct participants in the global aerospace value chain, competing not just domestically but against European rivals. Companies with deep ties to these states—such as Boeing (BA) or Lockheed Martin (LMT), which have major operations in Alabama—could benefit from policy tailwinds.

Defense Contracts: The U.S. Leads, but Europe Struggles to Keep Pace

The Airshow has become a proving ground for next-generation military technology. The U.S. is pulling ahead with Boeing's F-47 fighter (part of the Next Generation Air Dominance program), which has accumulated hundreds of flight hours and could enter service by 2027. In contrast, European programs like the Franco-German Future Combat Air System (FCAS) face delays, with its 2045 service entry date now seen as overly optimistic.

The Global Combat Air Program (GCAP), led by the U.K., Italy, and Japan, is a brighter spot, targeting a 2035 entry. Yet both programs require tens of billions in funding—funds that remain uncertain.

Investment Takeaway: U.S. defense contractors are best positioned to capitalize on near-term opportunities. Contracts like Lockheed Martin's $1 billion modification for the Conventional Prompt Strike missile program (see below) and Raytheon's $537 million deal for radar systems (AN/SPY-6) highlight the scale of U.S. military spending.

Trade Tariffs: A Cloud Over Transatlantic Collaboration

While defense programs proceed, trade tensions loom. The U.S. Section 232 investigation into aircraft imports threatens to impose tariffs on European exports like Airbus planes, while existing 50% tariffs on steel and aluminum continue to disrupt supply chains. European allies, including Airbus, warn that tariffs could add 20% to aircraft costs, squeezing margins for airlines like Delta (DAL).

The "zero-for-zero" tariff deal between the U.S. and EU remains deadlocked, with the U.S. refusing to drop its 10% baseline tariff. This僵局 creates uncertainty for companies reliant on cross-border parts sourcing—Airbus (EADSF) in particular, which uses 88% U.S.-made components in its A320neo.

Investment Risk: Avoid overexposure to aerospace firms with fragile supply chains. Airbus's stock price—already pressured by production bottlenecks—could face further declines if tariffs materialize.

Where to Invest Now: Defense Contractors and the "National Security" Play

The Paris Airshow underscores that defense spending is a growth engine for U.S. contractors, insulated from trade disputes due to long-term contracts and national security mandates. Key opportunities include:

1. Boeing (BA): Despite its struggles in commercial aviation, Boeing's dominance in defense (e.g., NGAD, MQ-18C drones) and ties to state delegations make it a core holding.
2. Raytheon Technologies (RTX): Benefiting from radar and missile contracts like the AN/SPY-6 program, which supports allies like Germany.
3. General Atomics (privately held): Its Collaborative Combat Aircraft (CCA), an AI-driven "wingman" drone, is a hot topic at the show. Watch for public listings or partnerships.
4. ETF Plays: The SPDR S&P Aerospace & Defense ETF (XAR) offers diversified exposure to sector leaders.

Final Take: Play Defense, Hedge on Trade

Investors should prioritize U.S. defense contractors with strong government ties and next-gen tech exposure. For speculative bets, look to European firms like Terma (a Danish defense supplier at the Airshow) that are integrating with NATO allies.

On tariffs, brace for volatility: If the U.S. and EU fail to resolve their disputes, expect short-term dips in aerospace stocks. However, the long-term trend of elevated defense budgets (e.g., $850 billion for the U.S. in 2025) suggests that contractors like Lockheed and Raytheon will weather the storm.

The Paris Airshow is more than an exhibition—it's a blueprint for where capital is flowing. Follow the lawmakers, the contracts, and the tariffs. The next decade's aerospace winners are being picked now.