WASHINGTON — On this day one year ago, President Donald Trump declared that a “chronic trade deficit” had become a national emergency, resulting in the need for the United States to impose retaliatory tariffs on American allies and foes alike to “make America wealthy again.”
The announcement created shockwaves through global markets and set off a scramble from partners and allies to try and work out less punitive agreements. The volatile shifts that followed — in which the administration repeatedly paused or modified how it would employ tariffs, followed by the Supreme Court overturning the tariffs in February — seemed sure to disrupt the defense industry at a time of expected growth.
But, according to two experts and a former defense official, the defense industry has largely ridden out the worst of the storm, thanks to a series of national security exemptions. Where the impacts have been most felt, they say, is on the man hours and administrative burden of applying to obtain those exemptions, which often have to be done on a case-by-case basis.
“The administration has a very strong objective to sell more defense equipment overseas for better burden sharing,” said Dak Hardwick, vice president of international affairs for the Aerospace Industries Association. “That’s why they have recognized that defense as a sector is one of those strategic sectors to try and provide some tariff mitigation efforts.”
For most of 2025 defense and aerospace companies were primarily affected by the so-called “reciprocal tariffs,” imposed under the International Emergency Economic Powers Act (IEEPA). Companies have also suffered the ripple effects of tariffs on steel and aluminum purchases, known as Section 232 tariffs.
Defense contractors can avoid being hit with steel and aluminum tariffs — which are widely used in the manufacture of ships, aircraft and other weaponry — through Chapter 98 of the US Harmonized Tariff Schedule, which provides an exemption for certain defense materials.
The Defense Contracts Management Agency has been “really good” at working with companies to modify those contracts, Hardwick said. However, those exemptions have to be negotiated on a contract-by-contract basis, and raw materials such as aluminum and steel are frequently bought in bulk by companies who do both defense and commercial manufacturing.
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And while international weapons sales made using the foreign military sales (FMS) process are able to be exempted from tariffs, that doesn’t apply to weapons sold under the direct commercial sales process, he added.
The bureaucratic burden of seeking exemptions is also greater for small companies than the major primes. While large companies “have had to build the muscle to get these exemptions” through filing the required paperwork, smaller companies may be less likely to have the administrative or legal resources to take that on — potentially making them more vulnerable to tariff impacts, said Jonathan Hillman, senior fellow for geoeconomics at the Council on Foreign Relations.
“Big companies worry about that too, because visibility vanishes and blind spots arise the further companies look down their supply chains” he said.
The lack of a single clearinghouse office or agency overseeing the exemptions — as well as other macroeconomic pressures — means it’s hard to get a real handle on the impacts, one former Defense Department official told Breaking Defense.
“There are provisions for defense work to be granted exemptions for tariffs, but it’s fairly bureaucratic, and they have to request it through their contracting officer,” the former official said.
“It’s hard to discern, sometimes, tariffs from other inflationary pressures, much like, frankly, when COVID was going on, it was hard to tease out the difference between COVID related increases in cost and inflation. I do think that … the shifting tariff policy makes it difficult for all companies to plan.”
The ground shifted again following the Supreme Court’s ruling, which paved the way for companies to seek reimbursement for lost costs, as well as the Trump administration’s announcement of a subsequent 10 percent tariff through Section 122 of the Trade Act of 1974.
Those new tariffs haven’t made a major impact on defense firms, Hardwick said. Instead, the biggest area where his office is receiving questions from aerospace and defense companies is the process to get refunds for costs related to the older IEEPA tariffs.
“That process is not settled out yet,” he said. “It’s something that we’re working on to find a mechanism that would provide for those types of refunds, because we want to ensure those small, medium-sized companies do get that money back to flow into their operating income.”
During earnings calls last April, the CEOs of the defense primes by and large predicted that the tariffs would have minimal financial impact on defense-specific margins, but those with exposure in the commercial aerospace industry estimated hundreds of millions of dollars in added costs.
In an earnings call in January, executives for RTX said tariffs resulted in $600 million in additional costs during 2025. Those costs, driven primarily by the commercial side of the company, were actually lower than its initial estimate of $800 million.
Meanwhile, Boeing — which initially predicted less than $500 million in tariff impacts last year — did not provide an updated total in its latest earnings call.
“This is super dynamic, right? It could change tomorrow,” Boeing CEO Kelly Ortberg told investors in January when asked about the company’s forecast for tariffs in 2026.
“But I think if you step back from all the dynamics day in, day out, I think at least the US administration fully understands the importance of commercial aerospace to the US economy. They’ve been very supportive. And we’ve worked through what initially looked like some pretty hairy tariff environments to resulting in pretty good outcomes.”
Ashley Roque contributed to this report.