RTX's Strategic Exposure to Trump-Era Trade and Defense Policies: Navigating Tariff Risks and Defense Opportunities in 2025–2026

RTX Corporation (RTX), a global leader in aerospace and defense, has found itself at the crossroads of Trump-era trade policies and surging defense demand in 2025. As the U.S. administration under President Donald Trump prioritizes protectionist measures and military modernization, RTX's strategic exposure to these dual forces presents both headwinds and tailwinds. This analysis evaluates how the company is balancing the financial pressures of tariffs with the growth opportunities in defense spending, offering insights for investors navigating this complex landscape.

Tariff Pressures: Mitigating a $500 Million Headwind

RTX's exposure to Trump-era tariffs has been a significant drag on its profitability. In early 2025, the company warned that tariffs could reduce annual operating profits by up to $850 million. However, by mid-2025, this estimate was revised downward to $500 million, reflecting proactive mitigation strategies such as supply-chain reconfigurations, tariff exemptions, and leveraging free-trade zones. While these adjustments have softened the blow, the persistent cost of compliance and potential escalation of trade tensions remain risks. For instance, Trump's recent threats to impose additional tariffs on Chinese imports could further strain RTX's commercial aerospace division, which relies on global supply chains.

Defense Spending: A $103 Billion Backlog and Geopolitical Tailwinds

The defense segment, however, has emerged as a counterbalance to these trade-related challenges. RTX's defense business has thrived amid heightened geopolitical tensions, particularly in the Middle East and Eastern Europe. By September 2025, the company reported a defense backlog of $103 billion, driven by robust demand for systems like the Patriot missile defense and the Iron Dome. A key catalyst has been the modernization of U.S. and NATO defense capabilities. For example, Germany's $3.5 billion order for SM-6 and SM-2 missile systems underscores the growing reliance on RTX's technology. Additionally, RTX secured a $1.5 billion contract for the Lower Tier Air and Missile Defense Sensor, highlighting its role in next-generation defense infrastructure.

The company's performance is further bolstered by its involvement in high-profile projects such as the proposed "Golden Dome" missile-defense system and the modernization of U.S. air-traffic control according to Bloomberg. These contracts not only provide revenue visibility but also align with Trump's emphasis on domestic military readiness. As of October 2025, RTX raised its full-year profit outlook, citing strong defense demand and improved cost management.

Balancing Risks and Opportunities: A Resilient Business Model

RTX's ability to navigate these dual forces hinges on its diversified portfolio. While tariffs have pressured its commercial aerospace division, the defense segment's resilience has offset these losses. For instance, the Raytheon defense unit reported a book-to-bill ratio of 2.27 in Q3 2025, indicating strong order inflows relative to shipments. This momentum is supported by global defense budgets, which have surged in response to conflicts in Ukraine and the Middle East. RTX's Tomahawk cruise missiles, deployed in U.S. operations in 2025, further underscore its strategic relevance in volatile regions.

However, investors must remain cautious. The Trump administration's unpredictable trade policies could reintroduce volatility, particularly if tariffs on steel, aluminum, or semiconductors escalate. Additionally, while defense spending is robust, geopolitical de-escalation in 2026 could temper demand for certain systems. RTX's success will depend on its ability to innovate in high-margin defense technologies while maintaining agility in its commercial operations.

Conclusion: A Strategic Play in a Polarized Market

RTX's strategic exposure to Trump-era policies paints a nuanced picture. The company faces material risks from tariffs but is simultaneously positioned to benefit from a defense spending boom. For investors, the key lies in assessing whether RTX's mitigation strategies can sustain profitability in the face of trade headwinds while capitalizing on long-term defense trends. With a $103 billion backlog and a diversified portfolio, RTX appears well-equipped to navigate the uncertainties of 2025–2026, making it a compelling, albeit cautious, bet in the aerospace-defense sector.