Contested Skies: Aerospace and Defense Equity Market Responses to the U.S.-EU Boeing-Airbus Trade Dispute

Abstract

Boeing and Airbus command a large percent of the global large commercial aircraft market, making aerospace and defense one of the most concentrated strategic industries in the world economy. How do tariff announcements and policy resolutions in a formally litigated bilateral trade dispute propagate through equity markets when the targeted industry is a strategic duopoly? To answer this question, I apply the market model event study framework of MacKinlay (1997) to five discrete, WTO-authorized policy events spanning the 2018-2021 U.S.-EU Boeing-Airbus dispute across U.S., European, and global aerospace and defense indices. I show that escalatory announcements generate negative cumulative abnormal returns across all three panels, the EU retaliatory tariff generates significant negative announcement-day reactions that are followed by sustained positive CAR accumulation across all three indices, and the June 2021 truce generates mixed regional responses: the global index exhibits significant negative CARs in several windows, the European index reveals positive but statistically insignificant post-truce accumulation, and the U.S. response varies across specifications. Across all five events, no index sustains unambiguously positive abnormal returns, and the dispute produced no clear equity market beneficiary.