Editor's Note: This analysis was originally published as a stock note by Morningstar Equity Research.

President Donald Trump imposed new tariffs on imports from US global trading partners with the stated aim of boosting domestic manufacturing. Aerospace firms are among the US’ most globally integrated manufacturers and include the country’s largest exporters, which complicates matters.

Why it matters: We expect exports by US producers will become subject to retaliatory tariffs. The longer these stay in effect, the more they may disrupt customers’ finances and crimp demand despite strong order backlogs.

• In 2024, US aerospace firms’ proportion of sales to customers outside the US were substantial: 59% for Hexcel HXL, 45.6% for Boeing BA, 42.9% for RTX RTX (including Raytheon), 37.2% for Heico HEI, 36.6% for TransDigm TDG, and 29.4% for Textron TXT.

Bears say: Investors concerned that the new import tariffs might be devastating to US aerospace firms may overestimate the risk: Boeing’s CFO Brian West recently outlined the fairly limited impact import tariffs would have on its results:

• West said 80% of Boeing’s commercial and 90% of its defense supply spending is domestic, including almost all the steel and aluminum it buys, which only constitutes 1%-2% of the value of a finished airplane. Moreover, Boeing’s near-term supplies are already in pretariff inventory.

• We see similar dynamics across our coverage list related to near- or medium-term impact of import tariffs on the highly engineered products these companies produce, though supply chain availability problems may eventually resurface.

The bottom line: We are reviewing our forecasts with a view to each company’s exposure to exports, the likely magnitude of retaliatory tariffs, and competitive position; the wider its economic moat, the less we expect to alter our fair value estimate.

• We expect to lower our $89 fair value estimate for no-moat Textron by a few dollars, as it has 20.6% of sales outside of the US and Europe (8%), 1.6 years of sales in its commercial backlog, and less pricing power than wide-moat peers, in our view.

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