Space companies swept up in far-reaching trade war

TAMPA, Fla. — Space companies were swept up in a broad stock market sell-off as governments around the world reacted to sweeping U.S. tariffs targeting dozens of countries.Shares of UFO, an exchange-traded fund (ETF) holding an international mix of 30 space companies, have fallen 12% following U.S. President Trump’s global import tax announcement April 2.That’s a steeper decline than the S&P 500, which has experienced its biggest drop in years, although some space companies outperformed the broader market.Shares in Rocket Lab and Viasat, the largest U.S.-based holdings in UFO’s portfolio, have fallen 15% and 13%, respectively.It’s a “baby out with the bathwater type of scenario,” said Andrew Chanin, CEO of the UFO manager ProcureAM.“Everyone around the world is trying to calibrate what the events of this week actually mean,” Chanin added, including “the effects as well as the stickiness.”China, facing a 34% tariff, announced a reciprocal 34% import tax April 4, along with other retaliatory measures set to take effect April 10, five days after Trump’s hike. The European Union and other U.S. trade partners are exploring their options.Tariffs work by requiring companies that import foreign goods to pay a tax to the government of the country where the goods are brought in.“Trump’s widespread tariffs are set to shake up supply chains across industries, and the space sector is among them,” said James Gellert, executive chair at RapidRatings, a supply chain and financial risk analytics firm headquartered in New York.

Rising costs and vulnerable suppliers

The U.S. space industry relies on a globally interconnected supply chain, Gellert said, sourcing materials such as semiconductors, electronic components, steel, plastics, resins and specialized fuel from countries on Trump’s tariff list. As a result, he warned manufacturing costs are set to rise significantly.“The biggest losers in this scenario are the small and medium-sized suppliers that form the backbone of the space industry,” he added.“These companies are already under immense pressure from rising interest rates, persistent inflation, and post-COVID market trends, suffering an average 233% decline in Net Profit After Taxes since 2019 as an example. Tariffs will only worsen the blow and intensify the pressure,” he said The company’s Financial Health Rating measures the likelihood of default over the next 12 months on a 100-point scale, meaning even small declines can significantly impact a company’s perceived stability.