Tariffs threaten F-35 fighter jet supply chain and U.S. defense exports

Lockheed Martin’s F-35 program faces rising costs and supply challenges as Trump’s tariff policies reshape global defense trade.

A U.S. Air Force F-35 fifth-generation fighter jet flies during NATO’s Ramstein Flag 2025 exercise at Leeuwarden Air Base on April 8, 2025. Photo by John Thys/AFP

By Anna Fadiah and Hayu Andini

The F-35 fighter jet has long stood as a symbol of America’s advanced military power and technological superiority. Manufactured by Lockheed Martin, the F-35 is also deeply reliant on a complex, international supply chain, with more than 1,900 suppliers across about a dozen nations. Among them is a Danish company located in a quiet suburb that provides over 80 unique parts for the aircraft. Now, the F-35 fighter jet supply chain is facing rising threats as former President Donald Trump’s trade policies—and particularly his use of tariffs—upend the flow of global defense manufacturing.

A weapon built by the world

Despite being an American-made aircraft, the F-35 is a collaborative product of multiple allied nations. Countries such as the United Kingdom, Italy, Canada, Australia, Norway, the Netherlands, and Denmark invested early in the program and subsequently secured major contracts. British firms, for example, contribute approximately 15% of the value of each F-35. BAE Systems manufactures parts of the fuselage and the pilot’s control interface, while Rolls-Royce provides the vertical take-off and landing technology used in one of the aircraft’s variants.

Meanwhile, Denmark’s Terma has produced more than 30,000 parts for the fighter jet, including gun pods. Australia’s defense sector has secured over $3.2 billion in contracts related to the jet, including critical avionics and propulsion components. In total, more than 1,100 aircraft have been sold to 20 countries since the F-35 entered service in 2015.

This extensive international footprint has helped cement America’s dominance in global arms sales. Between 2019 and 2024, the U.S. accounted for 43% of the world’s weapons exports, according to the Stockholm International Peace Research Institute. However, with imports making up only about 3% of total U.S. defense procurement, the country’s export-reliant weapons industry now finds itself vulnerable to the unintended consequences of aggressive trade policy.

Tariffs and their ripple effect

The Trump administration’s sweeping tariff agenda, intended to bolster domestic industry and reduce reliance on foreign goods, is now creating significant headwinds for the F-35 fighter jet supply chain. Tariffs have driven up the cost of raw materials like steel and aluminum—essential inputs for defense manufacturing. Defense companies are warning that these new trade barriers are inflating the price of key components, and ultimately, the cost of weapons systems themselves.

Christopher Calio, CEO of RTX, which supplies sensors and engines for the F-35, emphasized the importance of tariff-free trade for maintaining America’s industrial edge in defense. “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,” he said during an earnings call.

But RTX, like others in the sector, faces increasing pressure. The company projects that tariffs will cost it around $850 million this year, particularly in its commercial divisions that rely heavily on international parts and materials. While some defense contractors, like Northrop Grumman, maintain a largely domestic supply chain—with only 5% of its sourcing abroad—others are more exposed to price shocks.

Corporate maneuvering and legal loopholes

In response, major defense contractors are scouring their contracts for legal mechanisms that could mitigate the impact. One such option is the “Chapter 98” provision, which allows companies to import certain products duty-free if deemed “emergency war material” by the U.S. government. According to Dak Hardwick of the Aerospace Industries Association, this clause is now under review by several firms seeking relief from rising tariffs.

Lockheed Martin has indicated that many of its contracts allow for cost adjustments, meaning that buyers—not the company—could end up paying more. “For the vast majority of our external contracts, we’ve got mechanisms to recover impacts,” said Evan Scott, the company’s chief financial officer.

Still, this raises concerns for international buyers who may face higher costs for American weapons. At a time when foreign governments are pushing for more domestic production and technology sharing, cost inflation could make U.S. exports less attractive.

Calls for congressional carve-outs

Some lawmakers are pushing for defense-specific exemptions from tariffs. Senator Kevin Cramer, a Republican member of the Armed Services Committee, has argued that many defense parts come from trusted allies and should not be subject to the same duties as goods from rival nations. “We need the appropriate carve-outs that recognize these friendships,” Cramer said. “Otherwise, how does the F-35 not become more expensive? It clearly would.”

So far, the White House and the Department of Defense have remained silent on whether such exemptions are under consideration.

Shifting global production

Beyond the F-35, other U.S. defense systems are beginning to see a shift in their global production footprints. Starting in July, Germany’s Rheinmetall will produce portions of the F-35’s fuselage in a new factory in the country. Additionally, a Spanish company has secured a contract to produce components for the jet, and a separate German facility is set to manufacture missiles for the Patriot air-defense system.

This trend reflects a broader strategy by foreign governments to gain industrial benefits from their arms purchases. “There’s a clear movement toward greater domestic participation in these deals,” said Doug Berenson, a partner at the consulting firm Oliver Wyman.

Domestic sourcing faces its own hurdles

At home, defense manufacturers must also navigate rising costs and supply disruptions caused by tariffs on materials like steel and rare earth elements. By law, American defense contractors are required to use U.S.-made steel—a rule that has grown more expensive to comply with amid surging prices.

Further complicating matters is the growing scarcity of rare earth elements, which are crucial to many advanced weapons systems, including the F-35. The Trump administration’s decision to impose new tariffs on Chinese imports, followed by China’s countermeasures and export restrictions, has only intensified the crunch.

To prepare for these supply disruptions, Lockheed Martin has reportedly built up a reserve stockpile of critical materials. But long-term uncertainty remains.

A delicate balance

As the F-35 fighter jet supply chain grows increasingly entangled with geopolitical trade disputes, defense companies are being forced to adapt. The Pentagon, already burdened with massive budgets, may have to absorb higher costs or risk compromising readiness. International partners may reevaluate their procurement strategies, and lawmakers will likely face renewed pressure to protect the defense sector from the broader fallout of isolationist trade policy.

On a recent call with investors, General Dynamics CEO Phebe Novakovic summed up the industry’s dilemma: “Anything I say on that subject, given our lack of proper knowledge, will almost certainly be wrong.”

For now, the world’s most expensive weapons program stands at a crossroads—caught between global integration and nationalistic policy. The outcome may redefine how America builds, sells, and secures its military power for years to come.