January 16, 2025 “Buy America” or Go Home?

Global political tensions and vulnerable supply chains point to increasing investment closer to home.

By Stephanie A. Roy, Morgan Lewis & Bockius LLP

As we look forward to 2025, we expect governments and companies alike to “go big or go home” with concerted efforts to address aerospace supply chain vulnerabilities. In the United States, especially, the last four years have exposed weak links that have delayed both commercial and government production programs at key moments. As a result, corporate and government leaders have been hard at work looking for ways to ameliorate these vulnerabilities at all stages of the supply chain.

In the United States, this translates into three trends we see for 2025:

• Increasing emphasis on domestic preference provisions under government procurement rules, along with more oversight of companies subject to these preference requirements;
• A diversified technology development and investment strategy by government programs; and
• A more active M&A environment as companies look to secure key inputs and governments seek to maintain a diversified domestic supply base.

Domestic Preference Emphasis and Enforcement. We expect increasing emphasis in US government procurement programs on domestic content and preference requirements as a new administration doubles down on domestic production. President Trump made this a focus during his first term, and we expect his second term will similarly emphasize supply chain resiliency and self-reliance.

Together with an emphasis on the procurement front, we also expect increasing oversight by the Departments of Commerce and Justice monitoring for compliance with these provisions by government contractors. For companies, this means taking a hard look at their supply chain and deciding what components can be sourced domestically while staying competitive. This also means looking closely at the systems used to track and document parts and components not only within the company itself but also within the vendors throughout the supply chain itself. This type of end-to-end documentation that goes down to the raw material level is increasingly necessary not just for prime government contractors but for players are all levels of the supply chain. The approach also has significant applications for supply chain resiliency planning. See No Time for Crisis: Revolutionizing The Supply Chain – Industry Today.

Early 2025 is a good time to review internal policies and make any advisable updates as companies also prepare to respond to any further efforts in Congress or at the administration level to foster domestic procurement and production.

A Diversified Technology Development and Investment Strategy. Recent supply chain disruptions revealed the less desirable underbelly of global supply chains. Raw materials bottlenecks, shipping disruptions, demand spikes, and – increasingly – geopolitical tensions have all worked to disrupt aerospace manufacturing efforts in recent years. As a result, governments and companies alike have awoken to the limitations of highly concentrated supply chains, even if the economics look good on paper.

And the risks appear to be rising. Increasing geopolitical tensions, protectionist tendencies, transportation limitations, and the specter of another global pandemic have convinced actors to invest in alternative, redundant, and “closer to home” supply chain solutions. We see this playing out in the United States in efforts like the CHIPS Act and government and commercial investment in a domestic rare earth metals supply chain.

We also expect the US government to foster a more diversified supply base by pursuing a broad approach to technology development. We see this playing out in the US Space Force’s procurement approach for its Proliferated Warfighter Space Architecture, where the force is funding multiple awardees for technology development objectives and following up with multiple awardees for subsequent procurement programs. This keeps more industry players up-to-date on the latest technologies and ready to respond to new and evolving requirements. These investments are also another example of global geopolitical tensions driving supply chain investment in the United States, as US officials seek to address rapidly advancing Chinese capabilities in space.

On the commercial front, we expect the incoming administration to focus on shaping domestic production through procurement rules and increasing the costs of imports through tariffs and less emphasis on government investment approaches like that used with the CHIPS Act.

A More Active M&A Space. We also expect supply chain considerations to drive a certain portion of acquisitions activity. Companies looking to secure key inputs for strategic programs will be looking for ways to lock in strategic suppliers, including by bringing them under the corporate umbrella. See Restructuring the Supply Base – Industry Today. This will take the form of deals to acquire established suppliers and their known solutions along with efforts to ingest smaller and newer suppliers that offer promising technologies.

Companies will need to be careful, however, that their acquisition activity is not perceived by competition regulators as having a negative impact on the broader supply chain. With the US government’s recent emphasis on maintaining a more expansive stable of technology-capable contractors in critical sectors, we expect a higher level of scrutiny for deals that look like one company is locking up an important component needed by its competitors as well. We do not think that companies can rely on a more quiescent Republican administration on deal reviews and enforcement. Instead, companies will need to pick their targets and deal structures to bolster their own competitiveness without seeming to deny other players in the industry access to necessary inputs.

As the aerospace industry enters 2025, expect changes within it to be driven by a mix of domestic emphasis, diversified investment strategies, and strategic M&A activity, with the ultimate goal of strengthening supply chain resiliency. As companies and governments navigate evolving geopolitical tensions and economic pressures, prioritizing innovation and compliance will be key to success in this dynamic landscape. By proactively addressing vulnerabilities and adapting to policy shifts, industry players can position themselves for sustainable growth while contributing to a more robust and self-reliant aerospace ecosystem.

About the Author:
Stephanie Roy is a partner at Morgan Lewis. She advises telecommunications and aerospace companies on strategic regulatory and commercial transactional matters.

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