Rolls-Royce will convene an annual general meeting (AGM) today (1 May) to formulate what the chief executive, Tufan Erginbilgic, referred to as their “mitigating actions” to the global tariff increases.
Protectionism has seeped into global diplomacy, brought about by the whims of US President Donald Trump and a loose set of principles that constitute the America First doctrine. As part of this agenda, the US government aim to rectify what they see as a costly imbalance in their relationships with allies and enemies alike.
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In this vain, the administration has placed a universal tariff of at least 10%, and a 25% standard tariff on steel and aluminium imports. This decision, which came into effect on what Trump memorialised as ‘Liberation Day’ (2 April), will have a debilitating impact on trade and cooperation in the defence industry.
From American aircraft carriers to F-35 multirole aircraft, the costs incurred on the US Department of Defense (DoD) will doubtless grow.
Likewise, an ensuing trade war only “helps both Russia and China,” observed Mark Cancian, a senior fellow at the Washington-based Center for Strategic and International Studies.
A critical supplier to US programmes
For Rolls-Royce, the new costs of transatlantic trade will impact its supply of aerospace engines and propulsion systems to power a range of US military aircraft and ships.
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By GlobalDataThe British company is closely linked to numerous defence programmes the DoD is committed to delivering, including the 1,000 uncrewed Collaborative Combat Aircraft that will support the future NGAD fighter, the F-47.
In April, the company delivered the first AE 3007N engine to Boeing for the MQ-25 programme, the US Navy’s first aircraft carrier-based uncrewed air vehicle to be used for refuelling, intelligence and surveillance.
Tariffs hit defence
Rolls-Royce is not the first global defence supplier to acknowledge the financial hit. The US defence prime, RTX, recently warned that its full year earnings may suffer an $850m loss due to tariffs.
Meanwhile, the British-based defence company still anticipates “good progress” on their plan to cultivate resilient and agile operations. Their 2025 guidance of £2.7bn-£2.9bn ($3.6bn-$3.9bn) of underlying operating profit and £2.7bn-£2.9bn of free cash flow remains unchanged.
Nevertheless, Erginbilgic will tell shareholders in today’s AGM that the global tariff increases have “created a degree of uncertainty for the industry.”
“Global tariff increases have created a degree of uncertainty for the industry.”
Rolls-Royce CEO, Tufan Erginbilgic.
Rolls-Royce, he will add, “expect to offset the impact of announced tariffs on our business through the mitigating actions we are taking.”
However, further governance issues may complicate this in the coming weeks and months as The Guardian reported that the US has made a trade deal with the UK a lower order priority as the administration splits its negotiations with countries into three phases, prioritising Asia-Pacific allies such as South Korea.
The UK’s position would mean that any attempt by the British government to reach a better settlement will be delayed, allowing tariffs to take effect for a longer period of time.
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