RTX reduced its 2025 profit forecast on Tuesday, citing higher costs and supply pressures linked to U.S. trade policy. The aerospace and defense company said strong demand for engines and aftermarket services could not offset the hit from tariffs on aluminum, steel, and goods from China.
The change comes as markets face fresh uncertainty. Tariffs imposed during the Trump administration have tightened a supply chain that was already strained. RTX warned that its planning now assumes sustained duties on key materials and trading partners, adding a sharp headwind to costs next year.
Background on the Tariffs
Steel and aluminum tariffs have been a persistent challenge for manufacturers since they were introduced. Aerospace suppliers rely on stable input costs and predictable shipping schedules to meet delivery targets. Rising duties can ripple through production lines, affecting everything from raw materials to spare parts.
RTX laid out the assumptions behind its guidance, providing rare clarity on the scale of the tariff impact.
“RTX had warned of an $850 million hit from the trade war, though it was based on the assumption that steel and aluminum tariffs remain at 25%, China tariffs remain at 145% and global reciprocal tariffs remain at 10%.”
These estimates frame the company’s downside risk if current policies stay in place. They also help explain why a backlog of orders and high service activity are not translating into stronger profit expectations.
Company Outlook and Supply Chain Pressure
Executives pointed to healthy end-market demand. Airlines are flying more, maintenance cycles are rising, and engine performance upgrades are in focus. That has boosted aftermarket services, a high-margin business for engine makers and their partners.
But elevated input costs can erode those margins. When metal tariffs rise, suppliers face higher purchase prices or longer waits for alternative sources. Shipping costs and delays compound the problem, creating bottlenecks that hurt productivity.
RTX framed the issue in practical terms: the financial outlook is solid on sales, but pressured on cost. The company’s reset suggests a cautious approach through 2025 as it navigates pricing negotiations, supplier contracts, and inventory buffers.
What the Numbers Suggest
The company’s scenario points to sustained policy risks. If tariff rates stay in place, the cost structure will likely remain elevated across the production chain.
- Steel and aluminum duties: Holding at 25% raises baseline material costs.
- China tariffs: An assumed 145% rate adds weight to component and subassembly expenses.
- Reciprocal tariffs: A global 10% assumption signals broader cross-border friction.
- Estimated impact: RTX cited an $850 million hit under these conditions.
In practice, that could mean tighter cost controls, more supplier audits, and strategic stockpiles to avoid disruptions. It may also lead to selective price increases for customers where contracts allow.
Industry Impact and Multiple Viewpoints
Aerospace peers face similar pressures, though effects vary based on inventory positions and contract structures. Companies with long-term metal supply agreements may see delayed impacts, while those buying on spot markets feel changes faster.
Union leaders and workforce advocates often warn that higher costs can slow hiring or shift capital spending. Suppliers, many of them small and mid-sized firms, can face cash-flow strains from sudden price spikes. Airlines, meanwhile, depend on steady spare parts and engine availability to keep fleets flying.
RTX’s caution highlights the balancing act between demand strength and policy-driven costs. While defense programs may offer steadier margins, commercial aviation carries more sensitivity to materials and trade routes.
What to Watch Next
Investors and customers will track several indicators through 2025. Any policy shifts could quickly change the cost outlook. So could disruptions at metal mills or logistics hubs.
- Tariff policy updates and exemptions.
- Supplier delivery times and inventory levels.
- Engine shop visit volumes and pricing.
- Contract adjustments that share costs with customers.
RTX’s lowered forecast reflects a cautious stance rather than a demand slump. The company is signaling that execution will hinge on managing costs while meeting strong order books. If tariffs ease, profit expectations could rebound. If they persist, careful spending and supply partnerships will remain central to the plan.
