Key Points
President Trump announced new tariffs on drone imports today.
Red Cat should be able to dodge the tariffs as it operates solely within the U.S.
Like a cat on a hot tin roof, Red Cat Holdings (NASDAQ: RCAT) stock jumped this morning after President Trump announced new tariffs on imported drones and drone parts.
As of 10:30 a.m. ET Friday, Red Cat stock is up a lucky 7.7%.
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President Trump's drone import ban
As The Wall Street Journal reports today, the new tariffs are intended to boost drone production and create jobs in the drone industry in the U.S. -- while also enhancing national security by developing a home-grown drones industrial base.
China currently dominates international drone production, and isn't necessarily a friendly power -- not one the U.S. wants to depend on for its drone supply chain in a time of conflict. Accordingly, the Journal notes that imports of drones and drone parts from China "will face significantly higher levies than those from allied nations." Friendly nations such as Japan, Liechtenstein, South Korea, Switzerland, and Taiwan, as well as EU countries, will be tariffed at only 15%. The U.K. will receive a 10% tariff rate on drones.
Tariffs will also vary based on how advanced the drones and drone components are, with thermal imaging equipment in particular subject to 100% tariffs. The tariffs will begin being implemented three weeks from now and will fully roll out over the next six months.
What it means for Red Cat
According to data from S&P Global Market Intelligence, Red Cat does business mostly within the United States, and the company has no assets outside the U.S., insulating it from tariffs on the one hand -- and boosting its chances of making more sales to buyers less likely to buy imports.
Analysts were already expecting Red Cat's sales to more than triple this year. Thanks to the Trump tariffs, Red Cat now might do even better than that.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.