US Space Companies Keep Watchful Eye on Tariff Turmoil

While the Trump Administration’s 10 percent tariff on all imports took effect in April, alongside higher tariffs on imports from 57 countries, several U.S. space industry experts weighed in on what impact the U.S. president’s trade policy will have on the U.S. space economy in the coming months.

Clay Mowry, CEO of the American Institute of Aeronautics and Astronautics (AIAA), the largest aerospace technical society, said AIAA members are taking a cautious position in recognition that where tariffs ultimately land is “unsettled.”

“Much of the industry is waiting to see what comes out of [trade] negotiations over the coming days, weeks and months to see how the supply chain will ultimately be impacted by the tariffs,” Mowry said.

The U.S.-based space sector, like all industries, is tracking how tariff negotiations are progressing one country at a time. The situation is evolving — at the end of May, the U.S. Court of International Trade blocked the President from imposing some of the tariffs, but a federal appeals court quickly reinstated them. Since “Liberation Day” on April 2, tariff policy has gone through a series of changes, including when the United States and China agreed to roll back their sky-high tariffs on goods from each other’s country as part of a 90-day pause.

“Tariffs are a moving target at the moment,” said Andrew Chanin, CEO of Procure Holdings (ProcureAM), manager of a diversified space fund, UFO, comprised of 33 stocks from space-related industries. “It’s pretty difficult in the space industry for any one company to produce everything that they need. In many cases, you have to work with a lot of different partners and not all of them domestic.”

Caleb Henry, research director, Quilty Space, a space sector financial consultancy, said the impact of the tariffs is just being freshly calculated but their true magnitude is not yet known. Tariffs could make components supplied by Europe and Canada more expensive for American companies, he predicted.

“Companies are going to hurt – it’s just a matter of determining how much,” he said.

David Myers, chief strategy officer of Applied Aerospace, describes his firm as the “prototypical company” the Trump Administration wants to encourage with tariffs as a U.S.-based hard goods manufacturer that builds products entirely in the U.S. Yet Myers says that “evolving trade tariffs will have unintended consequences for supply-chains of many companies already operating within the country.”

Myers said Applied Aerospace is working to mitigate the situation as much as possible for its customers and is pre-buying some commonly used aerospace supplies where it makes sense. But he cautions that tariffs can have an impact on cost, schedule, and quality.

“The issue is not just cost. There are potential impacts to the entire production triangle – cost, schedule and quality,” Myers says. “There are good intentions to bring back American jobs and manufacturing. But many of the raw materials we use come from outside sources because there are few if any domestic suppliers.”

US: Mixed Tariff Effects

During first-quarter earnings calls, U.S.-based space firms sent mixed messages on tariff impacts to their businesses, with some outlining costs, while others stating they are insulated from tariff effects.

Iridium, which relies on equipment manufactured in Thailand, estimated a $3 million to $7 million impact depending on what level of tariffs stay in place this year. Iridium made a change last year to use a third-party logistics partner in Europe for shipments headed to the EU, instead of importing everything to the U.S., which allows it to avoid some import tariffs.

Quilty Space’s Henry noted that the user terminal part of the satellite industry that has supply chains out of Southeast Asia will be similarly affected.

Peter Cannito, Redwire Space’s chairman and CEO, stated during his firm’s first quarter earnings call that its “global manufacturing footprint serving local markets is a natural tariff mitigant,” and the company is “yet to see notable widespread price increases or shocks due to tariffs.”

Cannito added that in some instances “the current trade environment may lead to both increasing investment in U.S. manufacturing and in European space and defense budgets that could benefit Redwire's significant manufacturing presence in both regions.”

Nicole Robinson, president of DataPath, the U.S. subsidiary of Israel-based satellite tech firm Gilat Satellite Networks, sees reason for optimism in the trend to strengthen U.S. manufacturing. She notes that encouraging U.S. manufacturing has been a bipartisan movement, pointing to President Biden’s “Build America, Buy America Act,” and the rising international trend for sovereign capabilities.

“There’s likely a balance here, and though perhaps not a popular opinion — potential for upside to the U.S. space industry,” Robinson says. “If the current proposed tariffs hold, those with U.S. supply chain contributors are likely to take a large step ahead of the competition. Given supply chain challenges impacting componentry on an international stage, those who rely on overseas vendors for their product would likely experience increased costs and timelines to deliver. This inherently improves the posture of space industry manufacturers relying on an American industrial base to produce products.”

But not all industry sources agree that tariffs will have minimal impact. Brian Joyal, CEO of Veridiam, a California-based component manufacturer for launch vehicles and rocket engines, as well as nuclear power fuel and control systems, expects a 10 to 20 percent operational cost increase this year due to tariffs.

As a privately held firm, Veridiam anticipates that a portion of its free cash flow will be taken up by tariffs. “There’s going to be a point where we’re going to be stretched from a cash standpoint,” Joyal said.

Vulnerabilities in Sourcing Raw Materials

Mary Guenther, head of Space Policy at the Progressive Policy Institute, sees tariffs having wide-ranging negative effects on the U.S. space industry. She pointed out that while most manufacturing and advanced manufacturing currently is done in the U.S., the launch vehicle market and spacecraft builders still rely on components and raw materials from other countries.

“There’s a direct effect on things like aluminum and steel that are really important to everything from launch vehicles to satellites and spacecraft and beyond,” she said. “Canada and Europe —which have been traditional U.S. allies — are places where industry gets either raw materials or components depending on what you’re building.”

Some of Veridiam’s metals come from Europe, mainly the stainless steels. Joyal notes that many of the alloys his firm relies on utilize mineral sources from Canada or other countries, because the U.S. does not have sources of mineral supply, especially in the case of nickel. Inconel, a key nickel-based superalloy used in high-temperature applications like rocket engines and heat shields for reentry vehicles, will be particularly impacted and maybe hard to source.

“People have been caught up in the final product they’re purchasing but are forgetting on the metal side the challenge with the minerals that go into the stainless steel itself, which has a significant nickel content,” he says. “That’s what worries me is there could be double hits on tariffs, both people impacted by buying nickel and then having to source some of it.”

Myers says Applied Aerospace sources raw materials like aluminum and carbon fiber, and polymers from overseas. In some cases, customers specify that the carbon fiber for a nose cone of a launch vehicle, for example, must be sourced from a specific company and even from a specific production line because of the quality and safety requirements for aerospace applications.

“The supply industrial base, or the raw ingredients that go into the aerospace products, is heavily influenced by companies based in Germany, Japan, and Taiwan among others, because they have specialized in producing materials that meet a very stringent set of requirements.” Myers said. “Even when you can find a U.S.-based supplier, where everything is truly made in an American owned factory by American employees, one of the big challenges is that you can't just change-out the raw materials. The aircraft or spacecraft customer must be willing to go through the testing and re-certification process, which adds cost and risk to a program.”

AIAA’s Mowry acknowledged that the space sector relies on global supply chains, with components as well as raw materials sourced from all over the world. He cited as an example high-end aluminum, which comes predominantly from France for use in launch systems.

“U.S. manufacturers are now looking at which qualified materials they can source from a U.S. supply chain,” said Mowry, whose visits to Capitol Hill have generated a lot of tariff discussions. “It’s on the minds of a lot of congressional representatives and staff who have aerospace manufacturers in their districts.”

Primes and Startups Look to Manage Supply Chain Challenges

Portal Space Systems CEO Jeff Thornburg says he is seeing the impact of tariffs hit on purchasing, with some quotes double what they were before tariffs were introduced.

“Now we're seeing cost creep across the board with tariffs being identified in the bills. As we're getting things quoted, we're seeing the ramifications in those supply chain quotes where those tariff costs are starting to be highlighted. It is certainly affecting our decision making,” Thornburg says.

As the leader of a startup, Thornburg is cognizant of anything that slows things down or burns cash faster. He has concerns about how tariffs could slow down investment in startups, and slow down how fast new capabilities can reach the Department of Defense.

“What that means to me and other startups is do we have to slow down our progress, because now we can't afford to buy the equipment that we'd originally budgeted for? What does that translate to? It means that I could be slower to bring capability to the warfighting customer, and then I bring less of it,” he says. “It’s a double whammy.”

When it comes to navigating supply chain volatility caused by tariffs, Veridiam CEO Joyal considers larger firms to have a better advantage than smaller firms since they command stronger purchasing leverage to negotiate multi-year contracts.

He added that the industry has a bit too much of what he terms “the Jack Welch way of managing supply chains,” where the supply chain is expected to own its own material supply.

“There may have to be some changes there, where the primes start buying material for the supply chain. In some cases, we are seeing that – the cost of the materials is going to get too high and the demand on the material is going to be too great for the supply chain to have available cash to go do it,” he explained.

Henry with Quilty Space partially agreed with that assessment. “Small to medium-sized enterprises have less margin and less wiggle room. They may feel the effect of tariffs more acutely,” he said.

But Henry adds that the biggest ramifications could be the large aerospace primes that feed the overall space supply chain.

“If they lose a single satellite deal or launch deal, that has ramifications for suppliers that they depend upon for these awards. In other words, it will flow back down to the suppliers. The industry is pretty tightly integrated in that way,” he said.

Freezing of Capital Markets

Guenther and other experts noted a tightening within the capital markets that directly affects investment in space startups and the ability of established companies to grow their businesses.

The uncertainty within capital markets was a top concern raised by a senior U.S. space industry executive and investor, who requested to remain anonymous. He’s seen some space firms in the early stages of an IPO not move forward because institutional investors were not lining up due to the economic uncertainty.

“They just want to wait and it’s creating a domino effect,” he said.

The executive noted that whatever direction the administration takes with tariffs, the decision needs to come quickly: “What hurts is having tariffs change every week. That’s paralyzing everything from M&A deals and capital raises to credit facilities and IPOs,” he said.

Thornburg agrees that investors are skittish with the changes in tariff policy from the 90-day pause and various policy changes, and are waiting to see how it plays out.

“A 90-day pause doesn't do anything but prolong the uncertainty, which prolongs the lack of investor interest in investing, and the lack of people wanting to purchase things,” Thornburg says. “Everything is being grown to a halt by uncertainty, and I think the ramifications of that are now just being felt. How bad they get depends on how long we keep prolonging this game that we're playing right now.”

Other industry experts, including Chanin, see early signs of U.S. markets stabilizing with people “beginning to put their money to work in the U.S. capital markets.” “Individual foreign investors aren’t as quick to jump,” said Chanin, noting that there remains strong interest by foreign companies to spend in the U.S. space sector.

“A lot of times uncertainty creates opportunity. We’ve seen with the current administration things can move faster than people expect and can move in directions people didn’t necessarily anticipate. So it makes sense for people to remain vigilant and understand what’s unfolding geopolitically in both global macro markets and micro markets because we’re more interconnected now than before in history.”

Rising Protectionism within Space Sector

According to Guenther, the tariffs’ impact could negatively affect the U.S. space sector’s international partnerships, prompting countries to beef up their domestic capabilities and move away from reliance on American space company offerings.

Guenther foresees a cooling effect of U.S. and global partners in this increasingly fractured world that could potentially lead to “a drag on international partner utilization of the U.S. space stations” right when the United States will need them to come online as the International Space Station (ISS) is retired.

The stations already face an uncertain funding future since they require a substantial infusion of government money and the Trump administration proposed a 24 percent cut to NASA’s budget for fiscal year 2026.

The tariffs, combined with government funding cuts, could further work in favor of China while disfavoring United States interests.

“China has the Tiangong space station and has lately been offering access to their space station if not for free for a very low price,” notes Guenther.

The space industry, compared with other sectors, has enjoyed a certain level of protectionism, noted Henry. “Europe launches satellites on European rockets; Russians launch their satellites on Russian rockets. China does the same. In many ways, companies will look to their own market as their first market and there often is some level of political protection that helps them with that.”

Chanin sees the protectionism as inevitable: “Tariffs may force us to invest more domestically, while at the same time, companies from around the world could pivot away from the U.S. European firms could potentially step in and fill that void.”

He added that programs like Golden Dome, where the U.S. intends to create a layered defense shield, could drive billions of dollars toward U.S. space manufacturers and partners with a U.S. presence.

Despite being more protectionist, the U.S. space sector still relies on supply chains that are global. And many industry experts doubt that could radically change, especially in the near term.

“We’ve gotten used to electronics sourced from Asia or component manufacturers in Europe that historically do half or more of their business overseas,” said Henry, observing that there are component suppliers across Europe hungrier than their U.S. counterparts. “Because their domestic market is smaller, they’ve been forced to be scrappier to compete overseas,” he explained.

Regardless of how the tariffs land, Henry sees the U.S. space sector as a dominant player in the global space economy, and one that will continue to be a magnet for global investment.

“There is a big pull towards the United States … as the promised land for space companies,” he said. VS

Rachel Jewett and Mark Holmes contributed to this article.