By Alistair MacDonald

The F-35 is a symbol of U.S. military and technological might. It is also reliant for more than 80 parts on a little-known company based in a quiet Danish suburb.

Overall, the jet fighter, made by Lockheed Martin, has more than 1,900 suppliers from about a dozen countries that provide everything from tiny chip boards to the ejector seat.

The F-35's sprawling supply chain is one example of how even the U.S. defense industry, which exports billions of dollars worth of weapons while importing few in return, could be challenged by the Trump administration's sweeping trade policies.

Tariffs are primed to make many of the components and raw materials that go into modern weapons more expensive. Defense companies are now wrestling with the potential impact and have, like other industries, lobbied the White House for exemptions. In the meantime, the Pentagon could end up footing much of the bill.

A tariff-free environment "has been instrumental to the [aerospace and defense] industry maintaining one of the largest trade surpluses across American manufacturing industries for decades," said Christopher Calio, chief executive of RTX, which makes the F-35's sensors and engine.

"But like many companies in the industry, our supply chain and customer base are global, and we import raw materials, parts and modules from around the world," Calio said on a recent earnings call.

RTX expects to take a $850 million hit from tariffs this year, mainly at two divisions that have large commercial businesses.

Tariffs could also make weapons the U.S. does buy overseas, such as Norwegian and Israeli missiles, more expensive while adding to public pressure on some buyers of American equipment to purchase less.

Poring over contracts

In response to tariffs, defense companies are combing through supplier contracts looking for a provision -- referred to as a Chapter 98 -- that permits duty-free imports if the government has deemed the product "emergency war material," said Dak Hardwick of the Aerospace Industries Association, a trade group.

To be sure, some defense companies say tariffs won't have a big impact on their business. Northrop Grumman, for example, said that only 5% of its supply-chain spend is abroad.

Lockheed says it has an approach to mitigate the fallout from tariffs, and that buyers are responsible for cost increases in many of its contracts.

"For the vast majority of our external contracts, we've got mechanisms to recover impacts," said Evan Scott, Lockheed's finance chief, on a recent analyst call.

Some members of Congress have called for a defense-related tariff exemption, especially since many goods are supplied by U.S. allies.

"We need the appropriate carve-outs that recognize these friendships," said Sen. Kevin Cramer (R., N.D.), a member of the chamber's Armed Services Committee. Otherwise, "how does the F-35 not become more expensive, it clearly would."

The White House and Department of Defense didn't respond to requests for comment.

Arms export powerhouse

With a cost of more than $2 trillion over the program's life cycle, the F-35 has already been dubbed the world's most expensive weapon.

The fighter has been a particularly successful export, with more than 1,100 jets sold to 20 countries since it entered service in 2015, contributing to America's dominance of the arms trade.

The U.S. accounted for 43% of global weapons exports in the five years ended 2024, according to the Stockholm International Peace Research Institute, a think tank. The U.S. accounted for about 3% of imports.

Yet the F-35 uses parts from across the world. The program was partly financed by the U.K., Italy, Norway, the Netherlands, Australia, Canada and Denmark, whose companies then won contracts to supply components.

British companies contribute about 15% of the value of each aircraft, according to the U.K. government. Much of that is made in Britain. BAE Systems produces one of the plane's fuselages and the pilot's control stick in the U.K. Rolls-Royce supplies the technology that allows one variant of the F-35 to take off and land vertically. Even the jet's ejector seat is made in Britain.

Australia says its defense industry has secured more than $3.2 billion worth of F-35 contracts, including for components for the jet's avionics and propulsion systems.

In Denmark, one company alone -- Terma -- says it has made 30,000 parts for the program so far, including pods that hold the machine gun on some models.

Foreign governments are also increasingly seeking greater involvement in the production of the U.S. equipment they buy, said Doug Berenson, a partner at consulting firm Oliver Wyman.

From July, for instance, Rheinmetall will produce sections of the F-35 fuselage in a German factory. A German facility is also set to manufacture missiles for the Patriot air-defense system, while a Spanish company will provide some components.

Tariffs are having an impact on the parts and raw materials U.S. manufacturers source at home, too.

American defense companies are required to use U.S.-made steel, the price of which has risen sharply this year amid the introduction of tariffs on imports of the metal.

Demand for U.S.-sourced rare-earth elements is also likely to rise after Trump imposed tariffs on goods from China, and Beijing retaliated in part by adding new export controls. Such elements are needed for various weapons, including the F-35.

Lockheed has said it has a stockpile that acts as a buffer in the near term.

Amid the uncertainty, General Dynamics CEO Phebe Novakovic simply declined to answer questions on tariffs on a recent earnings call.

"Anything I say on that subject, given our lack of proper knowledge, will almost certainly be wrong," she said.

Write to Alistair MacDonald at Alistair.Macdonald@wsj.com

(END) Dow Jones Newswires

May 05, 2025 05:30 ET (09:30 GMT)

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