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Trump's America-First Foreign Policy Fuels 42% Surge in iShares U.S. Aerospace & Defense ETF

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  Published in Stocks and Investing on Friday, November 7th 2025 at 6:30 GMT by The Motley Fool
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Trump’s Foreign‑Policy Shift Fuels a Defense‑Focused ETF – But Investors Need to Read the Fine Print

In a recent piece on The Motley Fool, the author explains how President Donald Trump’s “America‑First” foreign‑policy agenda has unintentionally sparked a rally in a particular exchange‑traded fund (ETF) that tracks the U.S. aerospace and defense sector. While the ETF has enjoyed a sharp rise in the past few months, the article cautions that the upside is not without its risks. Below is a concise summary of the main points, data, and take‑aways.

1. Trump’s “Defense‑First” Outlook

Trump’s administration has repeatedly pushed for higher defense spending. The 2025 budget request, released by the Department of Defense (DoD) in early 2024, projected a 6.7 % increase in total defense outlays, amounting to roughly $800 billion more than the 2024 level. The president’s rhetoric has framed the defense buildup as essential for “protecting American jobs and maintaining a strategic advantage” over rivals such as Russia and China. The article notes that this narrative has resonated with the public and investors alike, leading to a surge in buying for defense‑related stocks.

2. The ETF that’s Riding the Wave

The ETF in question is the iShares U.S. Aerospace & Defense ETF (ITA), which holds a diversified basket of companies that manufacture aircraft, weapons systems, and defense technology. Key holdings include:

ITA’s expense ratio is 0.48 %, and it trades on the NYSE. Over the last 12 months, the ETF has posted a gain of +42 %—a sharp climb that the article attributes to the increased demand for defense products under the current administration.

3. How Foreign Policy Drives ETF Performance

The article explains that defense contractors tend to benefit from:

• Higher government procurement – As the DoD’s budget grows, companies like Lockheed and Raytheon receive more contracts for fighter jets, missile systems, and cyber‑security solutions.
• Export controls and sanctions – Trump’s tighter restrictions on Russian and Chinese defense exports can divert contracts to U.S. firms, boosting sales.
• Geopolitical tension – The perceived threat from adversaries (e.g., Russian aggression in Ukraine, heightened U.S.–China trade friction) spurs the government to invest more heavily in defense capabilities.

These factors collectively drive higher revenue, earnings, and ultimately share prices for the ETF’s constituents.

4. The “Catch”: Concentration and Geopolitical Risk

While the ETF’s performance is impressive, the article highlights several caveats that investors should consider:

The article notes that while the ETF is well‑positioned to benefit from current policy, its performance is not guaranteed. Investors may be rewarded by a continued uptick, but they must be prepared for volatility should any of these risks materialize.

5. Bottom‑Line Take‑Aways

1. Positive Momentum – Trump’s foreign‑policy stance has created a favorable environment for the U.S. aerospace and defense sector, driving the ITA ETF up 42 % in the past year.
2. High Exposure, High Reward – The ETF’s concentration in five major defense names makes it a concentrated play on defense spending.
3. Watch the Political Clock – A change in defense priorities, a shift in political leadership, or a sudden budget cut could reverse the ETF’s gains.
4. Diversify Wisely – Investors looking to tap defense growth might consider combining ITA with broader U.S. equity funds or adding a defensive tilt (e.g., utilities or consumer staples) to offset potential volatility.

Quick Links

• ITA ETF Fact Sheet – https://www.ishares.com/us/products/239721/ishares-u-s-aerospace-defense-etf
• DoD 2025 Budget Request – https://www.defense.gov/Resources/Annual-Defense-Plan
• Defense Contractors Spotlight – https://www.fool.com/investing/2025/11/07/defense-contrators-spotlight/

In conclusion, while Trump’s foreign‑policy trajectory has propelled the iShares U.S. Aerospace & Defense ETF to new highs, the “catch” lies in its concentrated nature and the inherent volatility of defense‑industry economics. Investors should weigh the potential upside against the risks outlined above before adding the ETF to their portfolios.