President Trump rattled markets and irked U.S. allies last week when he moved to impose steep tariffs on steel and aluminum imports, insisting such imports are a threat to national security. Now, a growing chorus from the defense industry has come out against the move.
In an interview on CNBC Friday, the head of one of the largest industry associations said the tariffs have the potential to increase costs for the military and hurt U.S. exporters.
“This is going to impact companies big and small in the aerospace and defense world [and] more importantly we’re worried about retaliation,” said Eric Fanning, chief executive of the Aerospace Industries Association, which represents more than 300 aerospace and defense manufacturers and suppliers.
Fanning went a step further when he argued that the tariffs could indirectly hurt U.S. national security by putting a damper on economic growth. The strong U.S. economy has long been a primary driver of the country’s military pre-eminence, with the U.S. government spending more on defense than any other country.
“Economic security is an important part of national security,” Fanning said. “We can see how the markets are reacting, we can see how our allies are reacting, so I’m concerned about some negative impacts that this might have on national security.”
The National Defense Industrial Association (NDIA), another trade group, said Monday that the tariffs will harm the military industrial base as well as U.S. service members if they are applied too broadly. Defense firms can seek “waivers” from domestic sourcing requirements such as the Buy American Act and the Berry Amendment, Depression-era laws that forbid foreign purchases on certain military supplies, but the White House has offered little clarity on whether similar exceptions would be built into the new tariffs.
“NDIA is concerned that any non-targeted increase in tariffs and resulting international retaliation will harm our defense industrial base and our warfighters, who depend on U.S. industry and its global defense supply chain of allies and partners to ensure they have the best equipment at an affordable cost,” an NDIA spokeswoman said in an emailed statement.
The consternation was prompted by a Trump administration announcement that it would impose a 25 percent tariff on steel and a 10 percent tariff on aluminum, both of which are important materials used to manufacture the military’s combat vehicles.
The White House has been hinting at steel and aluminum tariffs since last year and based its call for tariffs on a Commerce Department investigation that determined the present quantities of steel imports threaten to impair U.S. national security.
U.S. defense firms have a lot at stake in a potential trade war. During a pre-scheduled media briefing at Lockheed Martin’s Crystal City facility on Monday, chief executive Marillyn Hewson said she hadn’t “seen the details of” of any tariff increases, and therefore could “not say what the impact would be.”
She also said she had not had any conversations with international customers and instead remained focused on “meeting their national security requirements.”
Hewson said the company increasingly relies on international sales. Purchases from foreign countries accounted for 17 percent of the company’s revenue five years ago, she said, and it jumped to 30 percent last year.
She said that nearly half of sales of the F-35 Joint Strike Fighter, the company’s biggest program, would come from international customers in the next five years, as it works to make the stealthy jets more affordable.
Frank St. John, an executive vice president at the company, said Friday that figuring out how to respond to the tariffs would primarily fall to the company’s suppliers, many of whom are small businesses.
It is not out of the question that a foreign government would revoke a U.S. supplier’s business over a tariff dispute. That’s what happened last year when Boeing, Lockheed’s closest competitor in the government aerospace market, initiated a tariff action that would have levied 300 percent import taxes against Bombardier, a Canadian competitor in the commercial aviation market. The Canadian military responded by publicly excluding Boeing from its fighter jet competition.
“We’re kind of taking a ‘let’s see the details first’ approach, and then we’ll see how the dialogue plays out between different countries, and then develop a plan to move forward,” St. John said.