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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.
Blanket stress testing conducted by RapidRatings found that 25% tariffs on Canadian, Mexican and Chinese goods led to an average financial health decline of 5.2 for public aerospace suppliers and 5.3 for private counterparts.
Rare earth restrictions
China’s tariff retaliation targets rare earth elements critical to the space industry, tightening export controls on materials where even small amounts are vital for applications like electric propulsion systems, advanced sensors and magnet-based technologies.
According to Ryan Castilloux, founder of strategic metals and minerals consultancy Adamas Intelligence, the affected elements include:
- Yttrium, used in thermal barrier coatings, high-performance structural components, and laser crystals and optics that enable faster data transmission between spacecraft and Earth, often alongside erbium.
- Europium and terbium, which, together with yttrium, are used in phosphors for certain avionic displays.
- Gadolinium, used in radiation shielding materials.
- Samarium-cobalt (SmCo) magnets, essential for propulsion systems and other high-performance motors and sensors.
China controls nearly the entire refined supply of these rare earths, Castilloux said via email, and they are now a focus of stricter export regulations.
While Chinese companies already require permits to export these materials, incoming rules, he said, “make it explicit that Beijing may restrict/disallow exports of these dual-use [commercial and government] materials to companies involved in dual-use applications.”
It remains unclear how aggressively or selectively China will enforce the tighter controls.
“In the case of gallium and germanium [chip-making metals], what started as similar export restrictions ultimately turned into an outright export ban to the U.S. late last year,” Castilloux noted.
Given China’s near-monopoly on the supply of these rare earths, he said the new measures have the “potential to be a major pain point for the space industry if widely imposed.”
Although new rare earth producers are emerging outside of China, Castilloux added that full supply chain development takes time — and competition for alternative sources is intensifying.
Space industry response
U.S. space executives are eager to find ways to mitigate supply chain disruption and rising costs as they bolster domestic production to adjust to the Trump administration’s “America First” trade policies.
While the industry braces for near-term financial strain, executives also point to longer-term benefits from bringing more capabilities to the U.S., including an accelerated shift toward automation.
Spokespeople for Lockheed Martin and the U.S. subsidiary for Europe’s Airbus said they are still assessing the impact of recent tariff announcements.
“We continuously assess the global rare earth supply chain to ensure access to critical materials that support our customers’ missions,” a Lockheed Martin spokesperson said.
Boeing, Maxar and L3Harris declined to comment.
SpaceX, Rocket Lab and other U.S.-based satellite makers SpaceNews contacted did not respond to requests for comment.
“Spacefaring nations could diversify their supply chains by investing in alternative sources of rare earths,” said Novaspace principal advisor Maxime Puteaux.
“This includes ramping up domestic mining and refining capabilities and strengthening partnerships with resource-rich nations like Australia and Canada but this takes time to mitigate effects.”
As for the broader impact of U.S.-China tariffs and trade tensions on the space industry, he said tariffs on imported components and materials would increase production costs for satellite and launch providers, potentially delaying missions or making them less price-competitive.
“The unpredictability of the geopolitical climate injects risk into financing decisions,” he added.
“Venture capital and institutional investors may become more cautious, especially with hardware-intensive startups that rely on global supply chains.”
U.S.-based SpaceX, whose CEO Elon Musk is a prominent Trump ally, faces its own set of challenges on the international stage amid an intensifying global trade war.
In March, Ontario Premier Doug Ford said Canada’s most populous province will “rip up” a $68 million contract with SpaceX’s Starlink broadband subsidiary in response to U.S. tariffs.
And Yukon Premier Ranj Pillai said April 4 the northern Canadian territory will begin “reviewing Yukon government Starlink accounts and cancel accounts that are not required for business continuity or emergency response.”
SpaceX sent a letter March 11 to U.S. Trade Representative Jamieson Greer in response to the government’s call for information on unfair trade practices and non-reciprocal arrangements.
Mat Dunn, SpaceX’s senior director of global business and government affairs, emphasized that SpaceX’s vertically integrated manufacturing helps minimize dependency on imports.
However, Dunn said regulatory barriers in other countries still increase costs, including tariffs on Starlink user terminals and other equipment.
“As a general matter, SpaceX faces a range of regulatory complexities and trade barriers in every country that the U.S. Government should seek to address in order to support continued U.S. leadership in the space domain,” he wrote.
“Specifically, SpaceX must pay foreign governments for access to spectrum, import duties on Starlink equipment, and other regulatory fees that substantially increase the cost of operating in these countries — artificially.
“Additionally, some countries require SpaceX to pre-coordinate on spectrum sharing with domestic satellite operators prior to activating service — clearly a protectionist non-tariff trade barrier that ill-serves consumers and underserved populations.”
Dunn said foreign operators have used these policies to block or slow SpaceX from improving quality and lowering the costs of services to customers in these countries.
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