Now more expensive: the role of government tariffs in spacecraft supply

In February 2025, the United States Executive Branch invoked an emergency under the International Emergency Economic Powers Act and determined that tariffs on imports would be implemented in the near term due to the need to “protect the country from the major threat of illegal aliens and deadly drugs.” And additional global tariffs on steel were recently announced. The Ministry of Commerce and China’s customs administration announced taxes, tariffs and other export measures in response to the U.S. It is noteworthy that the U.S. has a peer adversary in space. Yes, that’s China. And as previously reported, China’s rapid build up in space is surpassing that of the U.S. with over 200 remote sensing satellites in space to do reconnaissance and surveillance.Critics of the tariff approach have warned of direct economic impacts such as higher costs and the U.S. facing short-term disruptions to the supply chain (though these disruptions will extend into a longer-term challenge). And, that there will be negative impacts on the importation of integrated circuits (roughly $35 billion in 2022) and broadcasting equipment (roughly $116 billion in 2022). Therefore, the parts of supply for spacecraft are most certainly about to exponentially increase in cost while the imports from the U.S. allied nations that offset the U.S. exports will decrease significantly. In all cases, tariffs imposed on sources of supply used by commercial organizations building spacecraft will negatively impact the entire industry with increased program costs and delays.Already struggling small space based ventures will now directly absorb the impacts as they try to find parts and pieces for their spacecraft and other products within budget for firm-fixed-price contracts they already bid and won. And, as we saw in 2022, the Department of Defense was not particularly sympathetic to prime contractors who were experiencing inflation economic conditions during contract performance.With commercial organizations facing the cost and schedule impacts of tariffs, they will now also have to be on the lookout for further challenges in where manufacturing and production are completed. Where an organization may have elected to ship various assembled components to the “next in line” assembly instruction, they will now have to evaluate the entire logistics chain for building, testing, and integrating spacecraft components. Small startups or cash-strapped ventures seeking to put their first satellite or rocket into orbit are most likely to be impacted. This includes space-based ventures who do not have the luxury of 3D printing specific parts or cannot staff and set up a vertically integrated manufacturing plant within the U.S. without churning out expensive capital expenditures at the peril of using the funds allocated for research and development.This tariff approach should be cautiously approached. With the elimination of worldwide strategic competition for space-based parts, commercial satellites and rocket providers will no longer be able to source worldwide and find the most minimally viable required item for the commodity needed. Instead, buyers will be scrambling to find internal or domestic sources of supply that are often over-engineered for the use cases, driving the costs per satellite or per rocket through the roof. And, the tariffs will likely throw the commercial item preference out the window by pricing U.S. companies seeking to do business domestically or internationally out of the fair and reasonable range. Ultimately leading to the U.S. government recreating systems and products as nationalized items from the now defunct commercial companies.We’ve been there before and languished from those decisions by not keeping a robust industrial defense base. By restricting access to the global markets, the U.S. has essentially limited its flourishing innovative space businesses to domestic sources of supply and knowledge. Meaning new and novel innovations in satellites or other electronic components will not be readily shared with the U.S., hindering the competitiveness and innovation of the U.S. This does not protect the American economy as purported by the tariffs.The U.S. went through this same exercise during the COVID-19 pandemic with disrupted supply chains that stopped the flow of raw materials and finished goods — the consequences of which were still unwinding themselves for space-based technology parts well into 2022 and delaying many small ventures from launching their experiments.Don’t let the U.S. become irrelevant or obsolete in space, simply due to a distraction of culture or immigration topics. The U.S. Trade Representatives and Ambassadors should use the Free Trade Agreements from the first term of this specific presidential administration, such as the U.S.-Mexico-Canada Agreement of 2020, to govern and handle the purchase of necessary spacecraft supplies in North America. Alternatively, the U.S. Congress should consider approving Special Economic Zones for outer space in negotiated trade agreements so that imported goods that are destined for outer space and are merely a pass through on Earth can be processed without being subjected to tariffs. Also, let the commercial markets dictate for themselves the price of goods and services, such as through long term purchase and supply agreements with capped increases, that are necessary for space items to keep the forward momentum and the industrial space base innovation pace.In all cases, commercial space industries should be reevaluating their lobbying efforts to come together and lawfully engage with government officials to show why tariffs are ultimately detrimental to this nascent sector. And further, these companies should deep dive into their supply chain and sourcing methods, including understanding if in-house vertical integration is the right fit (even if initially more expensive). While more expensive and time consuming, having dual sources of supplies — or the ability to produce more in-house — will help to shore up and make commercial space organizations more resilient to absorb the initial shocks to the supply chain, if the tariffs go into effect. The best solution is no tariffs, but the next best backup plan is to be prepared and not get caught by surprise when suppliers come around with 50% to 75% increases in pass-through prices to the commercial buyers.Jennifer Ogren specializes in information technology spaces and legal knowledge associated with federal contracting in her 20 years career at various defense, rocket and satellite companies. Jennifer has held various leadership roles in space focused corporate organizations, both in the commercial and international contracting spaces. She has dual masters degrees in the study of law and applied information management.SpaceNews is committed to publishing our community’s diverse perspectives. 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