Morgan Stanley: These US Defense Stocks could be Relatively Immune to Tariffs

Takeaways

• Morgan Stanley analysts stated Friday that defense companies that have maintained U.S. based supply chains because of national security could be relatively insulated against the impact new tariffs.
• They said that companies that primarily work with the U.S. Government also face less pressure when it comes to retaliatory duties imposed by other nations.
• Morgan Stanley believes that Lockheed Martin Northrop Grumman L3Harris and L3Harris can be well-positioned.

Morgan Stanley analysts said that U.S. defense companies like Lockheed Martin (LMT), Northrop Grumman, and Northrop Grumman could be relatively protected from the impact of the Trump Administration’s new tariffs.

Analysts said that many defense companies have had their supply chains based in the U.S. historically for reasons of national security. Analysts said that firms that work primarily for the U.S. government are also less likely to be affected by retaliatory duties imposed by other nations. 

Morgan Stanley listed Lockheed and Northrop along with L3Harris LHX as examples of companies that are well-positioned to weather a new tariff environment. Analysts said that they expect defense firms with greater exposure commercial clients, such as General Dynamics (GD) or Textron(TXT), to feel more pressure. 

Lockheed, Northrop and L3Harris each saw their shares fall by about 4% on Friday afternoon. L3Harris fell close to 3% as a result of a broad-based drop. General Dynamics and Textron dropped by more than 6% each. (Read Investopedia’s live coverage of today’s market action here.)