United States tariff impact on missile seekers

The April tariffs imposed by President Donald J. Trump are expected to impact the manufacturing industries in the United States as a standard 10% tariff was introduced on all imports with varying increases on other defense-related components. MarketsandMarkets analysts recently released a report on how the missile seekers market particularly will feel an impact because although the U.S. is a global leader in missile technology, it still relies on high-performance electronics, semiconductors, and rare-earth materials sourced internationally.

The global missile seekers market was valued around $4.5 billion and prior to the tariffs it was projected to grow at a compound annual growth rate (CAGR) between 5% and 7%. The U.S. is driving the market due to its expansive defense budget and ongoing investments in precision-guided munitions and advanced missile systems.

However, gallium arsenide wafers, germanium substrates, and infrared (IR) sensors needed in the missile seekers market come primarily from Germany, Taiwan, and South Korea. The EU will experience a 20% tariff while Taiwan will see 34% and South Korea between 24% and 25%.

Also, there will be supply constraints and longer lead times for rare-earth-based and semiconductor components used in IR and radar seekers.

MarketsandMarkets analysts believe there will be “increased investment in domestic microelectronics and materials R&D, especially in DARPA- and DOD-backed programs; U.S. defense primes will expand contracts with domestic tier 2 and tier 3 suppliers to improve internal production capabilities; and there will be a rising focus on trusted foundry networks and onshoring of critical technologies to reduce reliance on foreign suppliers.”

While the increased investment, expanded contracts, and focus on onshoring could help combat the tariffs in the U.S., MarketsandMarkets analysts also believe some pain points will remain. Tariff-induced price hikes could impact bill of materials (BOM) and integration costs, prolonged lead times could disrupt automation project timelines, end-users could pause or cancel robotics deployments due to budget overshoot, research and development (R&D) investments could be reduced as capital is diverted to absorb costs, and an overreliance on high-tariff regions could cause vendor instability.

The U.S. may still lead the pack when it comes to the missile seekers market but the tariffs could make holding onto the top spot tougher with so much needed technology coming from tariffed countries.