Published April 04, 2025

03:38 PM EDT

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Key Takeaways

  • Defense companies that have kept U.S.-based supply chains for national security reasons could be relatively insulated from the impact of new tariffs, Morgan Stanley analysts said Friday.
  • Companies that work primarily with the U.S. government also face less pressure from retaliatory tariffs imposed by other countries, they said.
  • Lockheed Martin, Northrop Grumman, and L3Harris are three companies Morgan Stanley said could be well-positioned.

U.S. defense contractors like Lockheed Martin (LMT) and Northrop Grumman (NOC) could be relatively insulated from the impacts of the Trump administration’s new tariffs, Morgan Stanley analysts said Friday.

Supply chains for many defense companies have historically been based in the U.S. for national security reasons, the analysts said. Firms that work primarily with the U.S. government also face less pressure from retaliatory tariffs imposed by other countries, they added. 

Morgan Stanley named Lockheed and Northrop, along with L3Harris (LHX), as examples of defense companies that could be well-positioned to weather the new tariff environment. Conversely, the analysts said they expect defense companies with greater exposure to commercial clients like General Dynamics (GD) and Textron (TXT) to feel more pressure. 

Shares of Lockheed and Northrop each fell about 4% in Friday afternoon trading, while L3Harris slid close to 3% amid a broad-based decline. General Dynamics and Textron shares dropped more than 6% and 7%, respectively. (Read Investopedia’s live coverage of today’s market action here.)

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  1. Morgan Stanley. “Aerospace & Defense. Flyby: US Tariffs – Defense More Insulated, but Complex for Aerospace.”