**Impact of Tariffs on Defense Contractors**
Major defense contractors exhibit varying opinions regarding the impact of the Trump administration’s tariffs. In an April 22 earnings call, RTX Corp. (previously Raytheon) projected potential losses of $850 million if the tariffs remain through 2025. Conversely, companies like Boeing and Lockheed Martin expressed confidence in their ability to mitigate effects from these tariffs.
**Details from RTX Corp.**
During the earnings call, RTX Chief Financial Officer Neil Mitchell detailed the anticipated losses, which consist of $250 million from tariffs on Canada and Mexico, another $250 million from tariffs imposed on China, and an estimated $300 million from a 10% tariff on imports from other countries. Additionally, steel and aluminum tariffs might incur another $50 million in costs. Mitchell mentioned that the majority of the financial impact would likely manifest in the latter half of 2025 as the company utilizes existing inventories.
Mitchell indicated that the proposed $850 million estimate includes potential “mitigations,” or strategies RTX could use to alleviate financial losses. These could involve utilizing free trade zones, applying for duty drawbacks, or sourcing from different suppliers. Due to the company’s history of importing goods without duties, many of these mitigation strategies are novel for RTX.
**Company Division Impact**
The projected tariff costs will be shared nearly equally between RTX’s subsidiaries, Collins and Pratt & Whitney, with each division incurring slightly over $400 million. The Raytheon division is expected to face minimal tariff impacts. RTX’s CEO Chris Calio noted that the company plans to pass on increased costs to customers where possible, emphasizing the need to balance pricing with market conditions.
**Lockheed Martin’s Response**
In the same earnings call, Lockheed Martin’s CEO Jim Taiclet expressed optimism about the company’s strong financial start to 2025, enabling it to absorb potential tariff repercussions. CFO Evan Scott highlighted the company’s ability to avoid tariffs through supply chain strategies. For fixed-price contracts that incur tariffs, mechanisms are in place to recover costs, albeit potentially requiring time.
Taiclet stated that legal restrictions against using Chinese-sourced materials make such tariffs less impactful for Lockheed. He further commented on the importance of U.S. sourcing for materials such as titanium and rare earths, underscoring a push for greater domestic production over the past several years.
**Boeing’s Forecast**
Boeing CEO Kelly Ortberg indicated confidence in managing tariff costs via duty drawbacks and asserted that the company’s supply chain is largely U.S.-based, with many imports from Canada and Mexico exempt under trade agreements. Ortberg mentioned some parts of the supply chain anticipate price increases due to tariffs but deemed them not significant enough to disrupt operations.
CFO Brian West reported that Boeing has stockpiled materials like aluminum and steel, which constitute 1% to 2% of an aircraft’s cost. He elaborated on the company’s extensive experience with global trade and tariff management, suggesting both confidence in handling tariff issues and optimism for continued stability.
**Considerations for the Aviation Industry**
Ortberg’s comments referenced challenges posed by tariffs, particularly relating to aircraft deliveries to China. However, he remained hopeful that Boeing’s financial reserves and production capabilities would sustain stability during potential tariff fluctuations. He acknowledged ongoing discussions between aviation industry representatives and the administration to address both immediate and long-term tariff implications.
**Author Background**
The article is authored by Stephen Losey, an air warfare reporter for Defense News, with prior experience covering military personnel and operations across various platforms, including the Air Force Times and Military.com.
