The election of Donald Trump as President of the United States has sent shockwaves throughout the global defense industry. As a major player in the European defense sector, BAE Systems PLC (LSE:BA) is likely to be impacted by the new administration’s policies. In this article, we will examine the potential implications of a Trump presidency on BAE Systems and its peer, QinetiQ Group PLC (LSE:QQ).

Increased Defense Spending

One of the key campaign promises made by President Trump was to increase defense spending in the United States. This pledge has been welcomed by defense contractors, including BAE Systems, which generates a significant portion of its revenue from the US market. With the US Department of Defense accounting for approximately 30% of BAE Systems’ sales, an increase in defense spending could provide a significant boost to the company’s top line.

Export Opportunities

In addition to increased defense spending, a Trump administration may also lead to increased export opportunities for BAE Systems. The President has indicated a willingness to relax export controls, which could enable the company to sell more of its products to countries in the Middle East and Asia. This could be particularly beneficial for BAE Systems’ Typhoon fighter jet program, which has been struggling to secure new orders in recent years.

QinetiQ Group PLC

While BAE Systems is likely to be a major beneficiary of a Trump administration, its peer, QinetiQ Group PLC, may also benefit from increased defense spending. QinetiQ is a leading provider of defense technology and services, and its expertise in areas such as cybersecurity and unmanned systems could be in high demand as the US military seeks to modernize its capabilities.

Challenges Ahead

While there are potential benefits for BAE Systems and QinetiQ Group PLC from a Trump administration, there are also challenges ahead. The President’s protectionist trade policies could lead to increased tariffs and trade barriers, which could negatively impact the companies’ export prospects. Additionally, the uncertainty surrounding the administration’s policies could lead to volatility in the companies’ share prices.

BAE Systems and QinetiQ Group PLC are emerging as key players in the European defense sector, and a Trump administration could provide a significant boost to their prospects. While there are challenges ahead, the companies’ expertise in areas such as defense technology and services could be in high demand as the US military seeks to modernize its capabilities. As the defense industry continues to evolve, investors will be watching closely to see how these companies navigate the changing landscape.