The global stock market sell-off, spurred by sweeping U.S. tariffs, significantly impacted space companies. The UFO ETF, tracking 30 international space companies, experienced a 12% drop following President Trump’s announcement. This decline surpasses the broader market downturn, with Rocket Lab and Viasat, major holdings in the ETF, falling 15% and 13%, respectively. Andrew Chanin, CEO of ProcureAM, the UFO manager, described the situation as a “baby out with the bathwater type of scenario,” highlighting the global uncertainty surrounding the implications of these tariffs.
China’s retaliatory 34% tariff on U.S. imports further exacerbated the situation, creating uncertainty for the future. The European Union and other trade partners are also evaluating their responses. James Gellert, executive chair at RapidRatings, emphasized that these tariffs will disrupt supply chains across numerous industries, including the space sector. The U.S. space industry relies on a global network for materials such as semiconductors, electronic components, and specialized fuels, many sourced from countries affected by tariffs. This leads to increased manufacturing costs.
Gellert highlighted the disproportionate impact on small and medium-sized suppliers, already facing challenges from rising interest rates and inflation. RapidRatings’ stress testing revealed that 25% tariffs on goods from Canada, Mexico, and China could decrease the financial health of aerospace suppliers by an average of 5.2 to 5.3 points on a 100-point scale. China's retaliatory measures specifically target rare earth elements, vital for space technology. Ryan Castilloux of Adamas Intelligence explained that China’s near-monopoly and tightened export controls on these materials present a significant challenge. He noted that restrictions could potentially evolve into outright export bans, mirroring recent events with gallium and germanium.
While alternative rare earth sources are developing, Castilloux emphasized the time required for a fully functional supply chain. The space industry is actively pursuing solutions to mitigate supply chain disruptions and rising costs, focusing on increased domestic production. Lockheed Martin is assessing the impact, stating they continuously evaluate their supply chain to ensure access to critical materials. Boeing, Maxar, and L3Harris declined to comment, and other companies including SpaceX did not respond. Maxime Puteaux of Novaspace suggested that diversifying supply chains through domestic mining and partnerships with resource-rich nations could mitigate the effects, albeit over a longer timescale. He warned of potential project delays and reduced price competitiveness due to increased production costs. Further, increased risk in financing could affect hardware-intensive startups.
SpaceX, despite its vertically integrated manufacturing, faces challenges including foreign tariffs on Starlink equipment and regulatory barriers. Mat Dunn, SpaceX’s senior director, highlighted these challenges in a letter to the U.S. Trade Representative, emphasizing that these barriers artificially increase operational costs. He mentioned spectrum access fees and other regulatory requirements as protectionist measures impacting service costs and availability for consumers.
Canada’s response to the U.S. tariffs included the cancellation of contracts with SpaceX’s Starlink subsidiary, adding further complexity to the situation. The overall impact of these trade tensions and tariffs remains uncertain, but it highlights the interconnectedness of the global space industry and the potential for significant disruptions in the near term.