BAE Systems, Qinetiq, Babcock among sliding defence stocks as Trump tariffs bite
President Trump’s sweeping package of global tariffs has sparked a sharp decline in defence sector stocks, as markets react to the shockwaves from his decision to impose a 10 per cent levy on British exports – among other measures.
The move has raised concerns on increased costs and the potential for a scarcity mindset that could drive prices for key materials in defence manufacturing.
“There is just a general sense of panic”, said Daniel Murray, chief executive of EFG Asset Management.
He added that as the market reacts to these trade tensions, “everything is getting killed, even good companies that will likely fare relatively well.”
UK defence hit hard
Shares in major UK and European defence firms were hit hard on Monday, with BAE Systems, Chemring Group, Qinetiq and Babcock International seeing significant losses.
Babcock International plunged by nearly eight per cent, closely followed by Chemring Group, which fell by 7.16 per cent.
Babcock declined to comment.
Meanwhile, British defence giants BAE Systems and Qinetiq slid four per cent and 6.41 per cent respectively.
Yet, a BAE systems spokesperson told CityAM: “We have very limited imports into the US and as such we aren’t materially impacted by the evolution of US tariff policy in the same way that some other companies are.”
Across Europe, companies like Germany’s Rheinmetall and Hensoldt also saw sharp declines of up to 14 per cent, reflecting a broader trend of investor uncertainty sparked by Trump’s tariff announcement.
Concerns for the defence sector
Kevan Craven, chief executive of ADS Group, which represents UK aerospace, defence, security and space companies, expressed concern over the tariffs’ impact.
Yet, he remained optimistic: “While the tariff announcement is disappointing, it will not kill our sectors.”
“However, our members forecast additional costs in the tens of millions of pounds, particularly in the aluminium and steel markets”, he said.
Craven went on to warn that the tariffs could drive up costs due to businesses’ instinct to stockpile, creating a scarcity mindset that could have long term ramifications.
The tariffs, which were announced as part of Trump’s ‘Liberation Day’ measures on Wednesday, are seen as an effort to address the US trade deficit with multiple countries, including the UK.
The UK government has launched a request for input on the potential retaliatory actions in response to these tariffs, with a deadline of 1st May for businesses to share their concerns.
European defence sector
Shares of European defence companies had been among the strongest performers earlier this year, driven by expectations of increased government spending on regional security.
Yet, following the tariff announcement, the defence sector has experienced one of its biggest declines in recent memory – and its biggest single day drop since the COVID-19 pandemic.
The Stoxx Europe 600 index plummeted 6.3 per cent with the defence sub-index falling by 9.3 per cent early on Monday.
With fears of an escalating global trade war, markets have reacted nervously.
The broader European stock market saw significant losses, with Germany’s DAX down ten per cent at the start of trading, while countries like France and Italy also faced corrections.
Spring statement and defence spending
Reeves fleshed out plans to boost the defence budget to 2.5 per cent of GDP.
She also announced additional funding earmarked for modernising the armed forces, citing the importance of investing in advanced technology and capabilities to ensure the UK remains at the forefront of global security.
This focus on defence spending reflects a broader shift towards bolstering national security, though global tariffs may complicate the full realisation of these funding goals.