European defence stocks hit hard by Trump’s import tariffs
Picture this: you’re walking down Whitehall in London on a Monday morning. You check your investment app and instantly see red, red, red. Defence stocks have taken a beating. What’s going on?
On Monday 7 April 2025, the European defence index (.SXPARO) dropped a hefty 8.9%, following an 8% decline on Friday. The culprit? New import tariffs announced by Donald Trump. Many investors fear a global recession. And that’s putting pressure even on the defence sector, which is often seen as a “safe haven”.
Big names tumble: here’s what happened
Some well-known companies took a serious hit:
- Rheinmetall (Germany): down 9% to 10%
- Hensoldt and Renk: similar declines
- BAE Systems: down 4%
- Dassault Aviation and Thales: down 6% to 9%
- Saab (Sweden): down 7%
- UK companies like Rolls-Royce, Chemring Group, Babcock International, and Qinetiq: down 6% to 7%
Even in the US, it wasn’t pretty: Boeing, Lockheed Martin and RTX also fell, although their losses were smaller — between 0.2% and 0.9%.
Why the sector is still worth a look
Despite the downturn, the European defence index is still 18% up for the year. Just last week, it was up 30%. So yes — it’s a sharp drop. But many analysts see it as a healthy correction after a strong rally.
You’ve probably felt it yourself: after a few months of rising prices, it’s tempting to take some profit. That’s exactly what many investors did. Add in Trump’s surprise tariffs and China’s rare earth export limits, and panic quickly spread.
Still, there’s good news:
- The sector remains profitable
- Companies often have reliable income through long-term defence contracts
- Balance sheets are strong — think BAE and Thales
- Dividends remain stable (around 3–4%)
And after the drop, shares are now better priced. For example, Rheinmetall’s price-to-earnings ratio has dropped below 14x.
So what should you do as an investor?
You might be wondering: should I buy now, wait, or sell?
Here’s a simple approach:
- See this as an opportunity. Markets often overreact to bad news.
- Buy gradually. Don’t go all in — build your position step by step.
- Think long-term. The world isn’t getting safer. Defence spending will likely keep rising.
But be aware of the risks
Of course, nothing’s risk-free. China’s restrictions on rare earth exports could delay weapons production. Political decisions or new trade limits could also disrupt deals.
Conclusion: smart investors act now
The recent drop is painful, but it’s also a chance. The fundamentals remain strong. Prices are down, but the companies themselves haven’t gotten weaker.
Living in Birmingham, Bristol or Manchester with defence shares in your portfolio? Now’s the time to stay calm and act smart.
What’s your move? Are you buying the dip or waiting it out? Share your strategy with other investors!
