Trade Wars in the Celestial Sphere: Reshaping the Global Space Economy and National Ambitions

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The Evolving Landscape of Global Trade: Tariffs, Controls, and Tensions (2024-2025)

The period between 2024 and 2025 has been marked by a notable escalation in global trade friction. This environment is characterized by significant disputes, primarily involving the United States and China, but also drawing in other major economic players such as Canada, Mexico, and the European Union. A complex web of tariffs, retaliatory measures, and export controls has emerged, creating an uncertain and volatile landscape for international commerce and technological exchange.

The United States administration, for instance, has enacted and proposed a series of tariffs impacting a substantial volume of global trade. By early 2025, new tariffs on Chinese imports took effect, initiating at a 10% rate and subsequently increasing to 20% by March 4, 2025. These measures are extensive, affecting an estimated $2.3 trillion of US goods imports based on 2024 figures, which accounts for approximately 71% of the total. Specific actions include a 10% tariff on all imports from China, effective February 4, 2025, which was then augmented by an additional 10% starting March 4, 2025. Tariffs of 25% were also levied on imports from Canada and Mexico, effective March 4, 2025, under the International Emergency Economic Powers Act (IEEPA), linked to concerns over border security and fentanyl trafficking.

These protectionist measures have not gone unanswered. Retaliation has become a common feature of this trade environment. As of April 2025, nations including China, Canada, and the European Union had announced or implemented retaliatory tariffs impacting an estimated $330 billion worth of US exports. China, for example, responded with 15% tariffs on a selection of U.S. products. This cycle of action and reaction contributes significantly to global economic instability. The “Liberation Day” announcements in mid-April 2025, for instance, resulted in approximately 18% of global maritime trade becoming subject to tariffs, a sharp increase from just 4% in early March 2025. Such volatility is a primary concern for international economic growth projections. The economic consequences are tangible; these trade measures are anticipated to reduce US market income by 1.2% in 2026 and translate to an average tax increase per US household of $1,155 in 2025. The pattern of escalating tariffs and counter-tariffs, particularly evident in the US-China relationship where one action directly provokes another, suggests a deepening trade conflict rather than isolated disputes.

Central to these trade conflicts are semiconductors and rare earth elements (REEs). These are not merely commodities; they represent strategic chokepoints in the global technological ecosystem. Control over their supply chains is increasingly being used as a lever for geopolitical influence and as a means to impede the technological progress of rival nations. The United States is employing a multifaceted strategy concerning semiconductors, which includes the imposition of tariffs aimed at stimulating domestic manufacturing—such as potential new tariffs with a June 2025 implementation date—alongside considerations to roll back certain AI chip export restrictions established under the previous administration.

China has responded with its own set of measures, notably including export controls on critical minerals. On April 4, 2025, Beijing imposed export restrictions, necessitating licenses, on seven specific rare earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—as well as on magnets that are indispensable for the defense, energy, and automotive industries. This action was explicitly taken “in response to U.S. President Donald Trump’s tariff increases on Chinese products” and followed earlier restrictions implemented between 2023 and 2025 on other critical materials such as gallium, germanium, antimony, graphite, and tungsten. The strategic importance of these REEs cannot be overstated; they are vital for a wide array of high-technology sectors, including aerospace and defense. An F-35 fighter jet, for example, incorporates over 900 pounds of REEs. The United States finds itself particularly vulnerable to disruptions in the supply of these medium and heavy REEs.

The flow of technology is further shaped by stringent export controls. The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has been notably active, implementing controls on advanced computing chips, AI model weights, and semiconductor manufacturing equipment (SME), with a primary focus on China. Illustrative of this, on December 2, 2024, BIS unveiled new regulations designed to curtail China’s capacity to produce advanced semiconductors. Subsequent rules introduced in December 2024 and January 2025 further broadened controls on advanced integrated circuits (ICs), SME, and AI model weights. China, in turn, has instituted its own export controls on dual-use items destined for the United States. An announcement on December 3, 2024, for example, prohibited the export of materials such as gallium, germanium, and superhard materials to U.S. military users or for military end-uses. This regulatory environment compels companies to navigate complex licensing protocols and adapt their global operational strategies. The sum of these trade actions—tariffs, export controls, and retaliations—contributes to a highly volatile global economic climate, impacting investment decisions and growth forecasts across numerous sectors, extending well beyond those directly targeted by the measures.

Shockwaves in High-Tech Sectors: Supply Chains Under Strain

The ongoing trade disputes and protectionist measures enacted in 2024 and 2025 are sending significant shockwaves through advanced technology industries, extending far beyond the primary antagonists. These impacts manifest as rising costs, disrupted global value chains, and an intensified international race for technological supremacy. The very structure of how technology is developed, manufactured, and distributed is being reshaped.

The volatility inherent in the current trade environment, characterized by tariffs and retaliatory actions, presents formidable challenges for U.S. industries, academic institutions, and workers striving to compete in cutting-edge technological fields. This is largely because modern technology value chains are intrinsically global and extraordinarily complex, depending on a worldwide network of collaboration and diverse sourcing for research initiatives, essential components, and basic materials.

The semiconductor and Artificial Intelligence (AI) sectors are at the epicenter of these disruptions. Tariffs imposed on semiconductor inputs inevitably render U.S. chip manufacturing more costly in the immediate term. For instance, proposed new U.S. tariffs on semiconductor manufacturing, anticipated for implementation around June 2025, could dramatically escalate project costs. A 10% tariff, for example, might add as much as $6.4 billion to a major undertaking like TSMC’s $100 billion U.S. expansion project. Such cost increases pose a direct threat to the economic feasibility of reshoring chip production, potentially counteracting the objectives of initiatives like the CHIPS Act by inflating construction and operational expenditures. The ripple effect is substantial: for every $1 increase in the price of semiconductors, the cost of final consumer goods could rise by as much as $3. Concurrently, U.S. export controls on advanced AI chips, such as the restrictions announced in April 2025 affecting Nvidia and AMD shipments to China, are designed to limit foreign access to critical U.S. technologies. However, the policy landscape is fluid; the U.S. administration is also reportedly considering the rescission of some Biden-era AI chip export regulations, specifically the “AI diffusion rule” slated for May 15, 2025. The stated aim is to pursue a “bold, inclusive strategy to American AI technology with trusted foreign countries” while denying it to adversaries. This policy flux introduces considerable regulatory uncertainty for the industry.

The biotechnology and life sciences sectors are also experiencing adverse effects. These industries inherently rely on global supply chains for raw materials, specialized equipment, and active pharmaceutical ingredients, with significant sourcing from countries including China and Canada. Tariffs on these essential inputs inflate the costs of research and production, thereby acting as a brake on innovation in crucial areas like drug development and medical technologies.

Similarly, the nascent quantum computing industry, which depends on a diverse array of over 15 distinct hardware components sourced from numerous countries including China, finds itself in a precarious position. Tariffs or retaliatory measures that restrict access to these vital components create a tangible risk of the United States losing its early lead in this pivotal technological field. Underscoring these concerns, additions to the U.S. Entity List in March 2025 included 42 Chinese entities. Some of these were designated for their involvement in acquiring U.S.-origin items to advance China’s quantum computing capabilities, with explicit reference to potential military applications.

The repercussions extend to critical minerals and the clean energy transition. Ongoing U.S.-China trade tensions jeopardize bilateral trade flows, and China’s implementation of export controls on critical minerals—such as rare earth elements, gallium, and germanium—directly impacts the access foreign companies have to these materials. This situation has the potential to affect the global transition to clean energy, as these minerals are indispensable for technologies like lithium-ion batteries, solar panels, and wind turbines. While the demand for these minerals saw robust growth in 2024, investment momentum in their development weakened due to prevailing market uncertainties and depressed prices.

The overarching consequences of these trade measures are rising costs across the board, severely disrupted global value chains, and an intensified pursuit of technological leadership by nations. Tariffs directly translate into higher costs for imported components and raw materials. These increased costs are frequently passed on to consumers or absorbed by businesses, thereby affecting profitability and investment capacity. As an example, U.S. tariffs have the potential to increase the cost of satellite buses by 10% to 20%.

Global supply chains are facing significant interruptions. Companies are contending with delays in shipments, increased transportation costs, and the urgent need to identify and secure alternative suppliers, often necessitating shifts to different countries. This is particularly evident in the aerospace and defense industry, where, for instance, 12% of the parts used in U.S.-built aircraft originate from China. The “trade policy volatility” and “heightened uncertainty” are acting as significant drags on economic growth and investment across sectors. The Trade Policy Uncertainty (TPU) Index, a measure of such concerns, recorded a dramatic spike of 218% between January and April 2025.

In response, nations are redoubling efforts to achieve technological leadership and reduce their dependencies on potentially unreliable foreign sources. China’s “Made in China 2025” (MIC25) initiative, for example, is a strategic plan aimed at diminishing the country’s reliance on foreign technology in key industries and establishing domestic champions. Simultaneously, the United States is actively promoting domestic manufacturing through policies such as the CHIPS Act and employing export controls as a tool to maintain its technological advantage.

This environment suggests that the trade disputes are symptomatic of a broader “technology cold war.” Access to and control over foundational technologies like AI, quantum computing, biotechnology, advanced semiconductors, and rare earth elements are increasingly viewed as primary instruments of national power and security, transcending purely economic competition. While protectionist measures like tariffs and domestic incentives such as the CHIPS Act are designed to bolster national industries, they carry the risk of inadvertently stifling innovation. By increasing the costs of research and development inputs, shielding domestic firms from essential competitive pressures, and disrupting the international collaborations vital for scientific breakthroughs, such policies might undermine the very innovation they aim to promote.

The reconfiguration of these intricate, globally integrated supply chains is proving to be a difficult and lengthy undertaking. Identifying, qualifying, and integrating new suppliers, especially for specialized, high-technology components, involves considerable time, financial investment, and inherent risks. This leads to extended periods of disruption and potential concerns regarding the quality and reliability of new sources. Furthermore, while nations are attempting to shift supply chains towards allied or “friendly” countries—a strategy often termed “friend-shoring”—this approach does not entirely eliminate vulnerabilities. It can lead to the concentration of risks in new geographical areas, and these allied nations may have their own distinct economic interests or be susceptible to pressures from other major global powers. The result could be a more fragmented, though not necessarily more secure, global economic system.

The Space Economy Confronts New Realities

The reverberations of global trade wars are profoundly impacting the space economy, an arena once characterized by cautious international collaboration but now increasingly defined by national interests and strategic competition. The primary effects are escalating costs for developing and manufacturing space systems, growing vulnerabilities in critical technology supply chains, and significant consequences for key commercial space markets.

The development and manufacturing of satellites, launch systems, and ground infrastructure are inherently capital-intensive. Tariffs on essential aerospace imports—particularly those targeting rare earth materials, sophisticated propulsion electronics, and specialized alloys sourced from China and other trade-restricted nations—are directly inflating costs within the satellite propulsion supply chain. Projections indicate that U.S. tariffs could elevate the cost of satellite buses by a substantial 10% to 20%. The communication systems and structural/mechanical components of these buses are especially vulnerable due to their reliance on imported technology and materials such as frames and propulsion systems.

The space exploration sector, which depends heavily on highly specialized components including advanced propulsion systems, satellite communication modules, and sophisticated sensors, has acutely felt the impact of these tariff increases. This financial pressure particularly strains commercial space ventures, potentially leading to higher service prices for customers and delays in launch schedules. Tariffs on fundamental materials like steel and aluminum, critical for military aircraft, also have a knock-on effect on the manufacturing of space launch vehicles, which often utilize similar materials and production processes. The broader aerospace manufacturing ecosystem, encompassing suppliers of aircraft parts, specialized tools, and machinery, is witnessing across-the-board cost increases due to tariffs on both raw materials and finished components. This situation particularly squeezes smaller manufacturers, who grapple with higher production costs and extended lead times, thereby disrupting project timelines and eroding profitability. Beyond direct costs, the pervasive uncertainty generated by these trade disputes, as evidenced by the significant spike in the Trade Policy Uncertainty Index, can depress investment and hiring in capital-intensive industries like the space sector. These rising costs serve as a direct barrier to the growth and innovation of the commercial space sector, impacting cost-sensitive segments such as small satellites and hindering the progress of new market entrants.

Supply chains for essential space technologies are exhibiting clear vulnerabilities. Semiconductors, including vital radiation-hardened (rad-hard) chips, are fundamental to space operations. While general semiconductor tariffs and export controls affect the broader supply, the specific implications for space-grade chips are a significant concern. Initiatives like the U.S. CHIPS Act are designed to bolster domestic production, but establishing sufficient capacity, especially for specialized semiconductor nodes and advanced packaging solutions, is a time-consuming process and may not fully alleviate reliance on overseas manufacturers in the near term.

Rare Earth Elements (REEs) are another critical vulnerability. China’s export restrictions on seven key REEs, including samarium, gadolinium, and terbium, directly affect components such as high-performance magnets used in satellite propulsion systems (like Hall Effect Thrusters and ion engines) and other indispensable defense and aerospace systems. The United States, in particular, is exposed in these specific REE supply chains.

Propulsion systems themselves are heavily impacted. Electric propulsion technologies face high tariff exposure due to their dependence on specialized electronics and REE magnets often sourced from China. Tariff hikes on power processing units (PPUs) essential for Hall Effect Thrusters have already led to delays in CubeSat missions. Liquid and hybrid propulsion systems are also experiencing increased costs for components such as pressure tanks, valves, and advanced nozzles, many of which are imported from Asia.

Advanced sensors and other specialized components are not immune. Tariffs on items like radar systems and specialized electronics escalate the overall costs for defense and space projects. The addition of Chinese entities such as “Aerospace Star Technology Application Co., Ltd.” to the U.S. Entity List in March 2025 could further complicate access to certain Chinese space-related technologies or collaborations. Indeed, the U.S. Department of Defense has identified satellite communications systems as having severe supply vulnerabilities stemming from reliance on critical minerals. This environment is accelerating the fragmentation of the previously globalized space supply chain into regional or politically aligned blocs, leading to duplicated efforts and potentially reduced overall efficiency.

These cost and supply chain pressures have direct consequences for key commercial space markets:

Satellite Communications: The global satellite bus market, foundational for communication satellites, is confronting increased production costs due to tariffs on components. North America is anticipated to experience the most significant tariff-related price increases, potentially decelerating satellite production and deployment in the region. Despite these headwinds, the overall Geostationary Orbit (GEO) satellite market is still projected for growth, buoyed by persistent demand for telecommunications services. The GEO Satellite Internet of Things (IoT) market is also expanding rapidly. However, market outlook reports explicitly note that trade relations and tariffs are influential factors affecting these forecasts.

Earth Observation (EO): While governmental agencies continue to be the largest consumers of EO data, a notable trend is the rise of sovereign EO initiatives. This is partly driven by geopolitical considerations and a desire among nations for data independence, which can be interpreted as a move towards securing national supply chains for critical information. This could foster the development of more national or regional EO systems rather than a reliance on global commercial providers. The satellite data services market, encompassing EO, is projected for robust growth, although the high initial investment required for satellite development and deployment remains a constraining factor. Geopolitical risks and the trend towards regionalization of trade are compelling companies in this sector to adapt their supply chain strategies.

Launch Services: The space launch services market is expected to see substantial growth, from an estimated $11.9 billion in 2025 to $22.18 billion by 2029. This expansion is primarily fueled by an increasing number of satellite deployments, particularly small satellites. However, industry reports caution that the outlook for this market is being shaped by the rapid evolution of global trade relations and tariff policies. Sanctions have already had a discernible impact on Russia’s commercial launch activities, rendering its Vostochny spaceport largely inactive due to a lack of Western clientele.

National security imperatives, amplified by the ongoing trade wars, are increasingly influencing decision-making within the space sector, sometimes prioritizing strategic considerations over purely commercial or scientific optimization. This is evident in concerted efforts to onshore critical manufacturing capabilities and to exert tighter control over the international flow of sensitive technologies. Furthermore, the dual-use nature of many space technologies—critical for both civilian and military applications—becomes a more acute dilemma. Export controls designed to prevent military exploitation by adversaries can inadvertently impede legitimate commercial ventures or scientific collaborations that rely on these same technologies.

National Space Strategies: Navigating a Contested Geopolitical Arena

The intensifying trade wars and the strategic competition over technology are compelling nations to reassess and adapt their national space strategies. Major spacefaring powers and emerging players alike are recalibrating their approaches to balance ambitions for leadership, ensure national security, foster industrial base resilience, and seize opportunities in a rapidly changing global landscape.

United States: Balancing Leadership, Security, and Industrial Base

The United States is employing a multi-pronged strategy to maintain its leading edge in space amidst growing geopolitical and trade-related challenges. Key policy responses include significant domestic investment initiatives, modernization of export control regimes, and the strategic use of entity lists to manage technology transfer.

The CHIPS and Science Act, signed into law in August 2022, represents a cornerstone of U.S. industrial policy, committing $39 billion in grant incentives and a 25% investment tax credit for domestic semiconductor manufacturing. This initiative aims to reverse the decades-long decline in the U.S. share of global semiconductor fabrication capacity, which fell from 37% in 1990 to just 10% in 2022, with a goal to increase it to 14% by 2032. While the CHIPS Act is intended to boost fabrication capabilities, concerns persist regarding whether it will create sufficient foundry capacity to meet the demands of U.S. chip designers and address existing deficiencies in advanced packaging capabilities. There’s also a potential policy friction: new, broad tariffs on semiconductor manufacturing equipment or materials could inadvertently inflate construction and operating costs for these new domestic fabs, thereby neutralizing some of the CHIPS Act’s intended benefits. This highlights an internal tension where trade protectionism could potentially hinder industrial policy objectives.

Simultaneously, the U.S. is modernizing its export control regimes, specifically the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR). In October 2024, the Departments of Commerce (BIS) and State (DDTC) issued a series of new rules governing space-related items. These updates generally aim to reduce licensing requirements for less sensitive space technologies, particularly when exported to close allies such as Australia, Canada, and the United Kingdom, thereby facilitating greater collaboration and strengthening the U.S. space industrial base. For example, controls under Export Control Classification Number (ECCN) 9A515.x were eased for these partner nations. The rules also refine controls on advanced technologies like remote sensing, with updates to thresholds in U.S. Munitions List (USML) Category XV(a)(7), and introduce new ECCNs for items such as materials designed to reduce spacecraft signatures (e.g., ECCN 9C515). New license exceptions, like License Exception CSA for official space agency programs, are being implemented. However, some segments of the commercial space industry had hoped for more extensive decontrols from the ITAR framework. Alongside these space-specific reforms, BIS continues to update controls on advanced computing ICs and AI, with significant rules issued in December 2024 and January 2025 that impact global technology diffusion, primarily targeting China. This dual-track approach—tightening controls on technology transfer to adversaries while easing collaboration with close allies—creates a complex, tiered system for international space partnerships.

The Entity List remains a key tool for the U.S. to restrict access to American technology for foreign entities deemed a threat to national security. On March 28, 2025, 70 entities were added to this list, with 42 of them based in China. Some were designated for their role in supporting China’s quantum technology advancements or for supplying other listed entities, such as Huawei. Notably, specific aerospace-related entities, including “Aeronautics Computing Technique Research Institute” and “Aerospace Star Technology Application Co., Ltd.,” were among those added. These entities now face a presumption of denial for license applications for all items subject to the EAR. The inclusion of entities for supporting foundational technologies like quantum computing, even where direct military applications are still emerging, suggests the Entity List is being wielded not just against immediate military threats but also to impede the broader technological and economic competitiveness of rival nations in strategic dual-use sectors.

The national security space doctrine of the United States is also evolving to reflect this more contested environment. The U.S. Space Force released its new capstone doctrine document (SFDD-1) on April 4, 2025, which prominently emphasizes the mission of achieving and maintaining “Space Superiority”. This doctrine codifies the service’s values, roles, organizational structure, and the principles for employing spacepower, including critical functions like space control and global mission operations. There is a clear push to normalize space as a warfighting domain, with U.S. Space Command (SPACECOM) reportedly seeking greater military decision-making authority, including over anti-satellite (ASAT) weapons. While some operational authorities have been delegated and space warfighting scenarios are being integrated into routine contingency planning, the practical pace of delegating these authorities and fielding new capabilities appears to be a subject of ongoing internal deliberation. This potentially creates a gap between declared doctrine and operational agility. The CSIS 2025 Space Threat Assessment underscores the persistence of threats such as GPS jamming and spoofing, as well as the advanced maneuvering capabilities demonstrated by Chinese and Russian satellites. The report also notes the U.S. intent to field additional counterspace capabilities in response to China’s expanding military space presence. Complementing these defense postures, the U.S. International Cyberspace & Digital Policy Strategy focuses on building “digital solidarity” with international partners to counter threats to cyberspace and critical infrastructure, which explicitly includes satellite networks.

China: The Drive for Self-Reliance and Technological Ascendancy

China’s national space strategy in 2024-2025 is characterized by an unwavering commitment to technological self-reliance and a determined pursuit of global leadership in advanced technologies, including those critical to the space sector. This ambition is framed by its “Made in China 2025” (MIC25) industrial policy and its comprehensive Military-Civil Fusion (MCF) strategy, all set against a backdrop of increasing foreign technology restrictions.

The overarching goal of technological self-reliance, often expressed by the term zili gengsheng (自力更生), is central to China’s current Five-Year Plan and its long-term strategic vision. The MIC25 initiative, launched in 2015, aims to transform China into a global leader in advanced manufacturing by 2025, with aerospace and next-generation information technology being key target sectors. A primary objective is to significantly reduce the nation’s dependence on foreign technology and achieve substantial domestic self-sufficiency. China has made tangible progress in diminishing import dependencies, partly by compelling foreign firms to localize production and research activities as a condition for market access, and through the acquisition of foreign companies to facilitate technology transfer. Despite these efforts, dependencies persist in highly critical areas, such as cutting-edge semiconductors and commercial aircraft components. The 2025 National Security White Paper, released on May 12, 2025, further underscores this drive. It significantly expands the definition of national security to explicitly include outer space, technology, and artificial intelligence. The document emphasizes technological self-reliance and the strategic decoupling from external vulnerabilities as paramount national security pillars, particularly in response to foreign-imposed restrictions. It explicitly calls for safeguarding key economic functions through the promotion of “technological independence”. Chairman Xi Jinping has personally declared technological innovation to be the “main battlefield of the international strategic game”.

The Military-Civil Fusion (MCF) strategy is a critical enabler of these ambitions. MCF aims to break down systemic barriers between military and civilian institutions, thereby mobilizing the rapidly expanding civilian research and development base to serve military modernization objectives. This strategy facilitates the direct transfer of data and cutting-edge technologies to the People’s Liberation Army (PLA), ensuring that China’s military capabilities advance in tandem with its civilian technological progress. Many private Chinese space companies operate under this national directive, contributing to defense programs while maintaining their commercial identities. The MCF strategy intends to enhance the efficiency of state-owned enterprises (SOEs) and encourage the gradual entry of private firms into the defense-industrial complex. However, SOEs often continue to enjoy advantages in terms of subsidies and integration into the national innovation ecosystem, with private companies frequently acting as suppliers to these larger state-controlled conglomerates. The United States and other Western nations view the MCF strategy with considerable concern, particularly regarding the development and proliferation of dual-use technologies. While MCF aims to accelerate military modernization, the persistent dominance and preferential treatment of SOEs over private firms might, in the long run, temper the agility and disruptive innovation often associated with more market-driven private sectors, potentially posing a structural challenge to China’s ultimate innovation goals.

In response to foreign technology restrictions, China has not only focused on internal development but has also implemented its own countermeasures, including export controls on critical materials. These actions are often framed as direct responses to U.S. tariffs and technology restrictions. Notable examples include export controls on gallium and germanium (effective August 2023), graphite (effective December 2023), and, significantly, on seven specific rare earth elements (effective April 4, 2025). The REE export restrictions implemented in April 2025 require export licenses and specifically target seven medium and heavy REEs that are crucial for defense and aerospace applications. Concurrently, sixteen U.S. entities, predominantly in the defense and aerospace sectors, were placed on China’s own export control list, limiting their ability to receive dual-use goods from China. Further, on December 3, 2024, China announced export bans on certain dual-use items, including gallium, germanium, antimony, and superhard materials, when destined for U.S. military users or for military end-uses. China’s 2025 National Security White Paper explicitly warns against “unilateral sanctions” and “long-arm jurisdiction,” positioning China as a stabilizing global force while simultaneously pursuing structural economic flexibility to reduce its dependency on Western-controlled value chains. These export controls serve multiple strategic purposes: they act as direct retaliation, provide leverage in trade negotiations, and incentivize the domestic upgrading of China’s own industries by encouraging higher-value processing at home rather than just exporting raw materials.

China is also actively advancing its own space program, with an intensive schedule of missions planned for 2025. These include the Tianwen-2 asteroid exploration mission and several crewed Shenzhou flights. Strategically, China is deepening its space cooperation with countries participating in the Belt and Road Initiative (BRI) and with BRICS nations, actively promoting its International Lunar Research Station (ILRS) as an alternative to Western-led lunar exploration efforts. This reflects a selective decoupling strategy: reducing vulnerabilities to Western technological chokepoints while simultaneously strengthening China’s central role in alternative global value chains and spheres of influence. In April 2025, the chief designer of China’s lunar program publicly accused the United States of interfering with its international space cooperation efforts, including those related to the ILRS.

Russia: Navigating Sanctions and Shifting Alliances

Russia’s space program, once a global leader, is facing profound challenges in 2024-2025 due to the cumulative impact of international sanctions, a shrinking skilled workforce, and strained international partnerships. These pressures are forcing significant shifts in its operational capabilities, strategic alliances, and future ambitions.

The impact of sanctions on Russia’s space programs—including its state corporation Roscosmos, the GLONASS navigation system, participation in the International Space Station (ISS), and plans for a new national orbital station—has been severe and multifaceted. Western sanctions, particularly those intensified after the 2022 invasion of Ukraine, and even earlier measures dating back to 2014, have significantly undermined the Russian space sector. One of the most visible consequences has been a decline in launch activity. In 2024, Russia conducted only 17 space launches, marking its lowest annual total in the post-Soviet era (excluding the pandemic-affected year of 2020). The final mission of the Soyuz 2.1v light launcher occurred in early 2025, reportedly due to a depletion of available engines.

Financially, Roscosmos has suffered substantial losses, with a reported cumulative net loss exceeding 110 billion rubles (approximately $1.3 billion) between 2015 and 2023. This financial strain is compounded by a significant reduction in its specialized workforce, which fell from approximately 235,700 in 2015 to around 170,500 by 2022. The development of advanced satellites, especially for communications, has been severely hampered by the lack of access to Western-made components. This has led to delays in fleet renewal for entities like the Russian Satellite Communications Company.

The GLONASS global navigation satellite system also faces an uncertain future. Newly launched Glonass-K2 satellites are reportedly undergoing modifications to replace embargoed electronic components. There are indications that for some military applications, Russia is resorting to consumer-grade GPS receivers or relying on China’s BeiDou navigation system. Plans for Russia’s new national space station, the Russian Orbital Service Station (ROSS), are struggling significantly. The launch of its first module, the NEM (Scientific Power Module), has been postponed from 2024 to at least 2028 due to insufficient funding. The substantial annual cost of maintaining Russia’s crewed spaceflight program already consumes more than a quarter of the country’s entire space budget, making the development of a new station an even greater financial burden. Furthermore, Russia’s primary commercial spaceport, Vostochny, remains largely underutilized due to the loss of Western clients. U.S. sanctions implemented in March 2021 under the ITAR included a policy of denial for exports of defense articles and services to Russia, with very limited and time-restricted exceptions for government space cooperation and commercial space launches. The cumulative effect of these pressures points to an accelerated decline of a legacy space power, with systemic degradation of capabilities rather than mere temporary setbacks.

In terms of international partnerships, sanctions have effectively severed most of Russia’s ties with Western space agencies and companies, with the notable exception of ongoing operations related to the International Space Station. However, Russia has announced its intention to withdraw from the ISS partnership after 2024 or by the end of the decade. This has led to an increased reliance on alternatives. Russia is reportedly turning to lower-grade industrial components from China for its satellite manufacturing needs. Its viable partnership options have drastically narrowed, now largely limited to countries like Belarus and Iran, with China emerging as a crucial, albeit increasingly dominant, strategic partner. This growing dependence on China risks positioning Russia as a junior partner in China-led space initiatives, such as the International Lunar Research Station (ILRS), especially as Russia’s indigenous launch vehicle capabilities face uncertainty.

Despite the severe impact of sanctions, there is evidence of sanctions evasion and the establishment of illicit procurement networks. Reports indicate that India, for example, has become a significant transshipment hub for restricted technologies, including advanced U.S.-trademarked chips, destined for Russia. This suggests that while sanctions are impactful, completely cutting off access to critical technologies for a determined state actor is exceedingly difficult, though such procurement likely comes at a higher cost and involves significant delays.

Russia’s continued pursuit of ambitious space projects like ROSS, despite the severe financial and technological constraints, suggests that national pride and the desire to maintain a semblance of great power status in the space domain remain potent drivers. These non-economic factors appear to heavily influence Russian space policy decisions, potentially leading to a misallocation of scarce resources in a challenging economic reality.

Europe (EU/ESA): Striving for “Strategic Autonomy”

In the face of escalating global trade tensions and the increasingly competitive and contested nature of the space domain, the European Union (EU) and the European Space Agency (ESA) are intensifying their pursuit of “strategic autonomy.” This overarching goal aims to bolster Europe’s capacity to act independently in space, secure its critical infrastructure, and ensure the resilience of its space industry supply chains.

A key legislative initiative underpinning this ambition is the forthcoming EU Space Act. The European Commission is expected to submit a proposal for this act in the latter half of 2025. This legislation is anticipated to establish new, legally binding regulations and requirements for space companies operating within the EU. It will likely cover a wide range of activities, including collision avoidance protocols, information sharing mandates, and cybersecurity standards, all designed to protect the European space industry and the sustainability of the space environment itself. This move signifies a broader, tentative global shift away from purely voluntary guidelines towards more formal and enforceable obligations in space governance. Complementing this, the EU’s Critical Entities Resilience (CER) Directive, which entered into application in October 2024, explicitly includes the space sector. It mandates risk assessments and the adoption of resilience-enhancing measures for entities identified as critical, specifically including the operators of ground-based infrastructure that supports space-based services. The EU’s drive for strategic autonomy appears to be largely a defensive necessity, a reaction to the unstable geopolitical environment and the instrumentalization of trade and technology by other major global powers, rather than an overtly expansionist policy.

A central pillar of Europe’s strategy is strengthening the resilience of its critical space component supply chains. European industrial policy increasingly emphasizes the need to secure robust and sustainable supply chains and reduce strategic dependencies on non-EU sources, a principle that extends from areas like battery raw materials to specialized space components. The Draghi report, an influential analysis of Europe’s competitiveness, highlighted the risks of deepening strategic dependencies and the potential erosion of Europe’s industrial base in the space sector if current trends of inaction persist. It called for greater ambition and clearer strategic direction from European institutions. ESA’s geographical return policy, though sometimes debated for its impact on pure market competitiveness, is often viewed as a crucial mechanism for fostering a diverse pan-European space ecosystem. This diversity, in turn, is seen as strengthening Europe’s resilience in critical technology fields by ensuring a broader and more varied supply chain. The EU’s Critical Raw Materials Act (CRMA), which became effective in May 2024, identifies strategic raw materials vital for aerospace and defense applications, and Europe is actively seeking partnerships, such as with Australia, to diversify its supply of these materials.

In response to broader trade tensions, particularly those emanating from U.S.-China disputes and direct U.S. tariffs that can affect European industries (e.g., the automotive sector), ESA and the European Commission are formulating strategies to navigate this complex environment. The ESA Report on the Space Economy 2025, published in March 2025, provides an annual assessment of the global space economy’s status and trends, with a specific focus on Europe’s position, covering public and private investment, launch activities, satellite deployments, and overall market evolution. Europe generally aims to maintain trade openness where possible, recognizing that protectionism can be detrimental to investment and productivity. However, there is also an acknowledgment that the fundamental nature of the global trade regime has shifted. The 2025 Geostrategic Outlook from the European Commission anticipates a continued global trend towards trade protectionism and assertive industrial policies by governments seeking to promote economic sovereignty, especially for critical technologies. Consequently, the new European Commission is expected to make increased use of trade-defensive instruments and heighten scrutiny of foreign direct investments in strategic sectors. ESA’s programmatic highlights for 2025, such as the launch of the Biomass mission for forest monitoring, reflect continued investment in strategic space capabilities. There is also a concerted push for initiatives like a multi-purpose EU Space Fund and improved access to finance for European space-focused SMEs and start-ups to foster indigenous growth.

An internal tension persists within European space policy: the balance between fostering pure, open market competitiveness (which might concentrate capabilities in a few dominant players) and ensuring broad industrial participation and technological sovereignty across all member states (often supported by mechanisms like ESA’s geographical return). The current climate of trade wars and geopolitical instability may tilt this balance further towards prioritizing resilience through a wider, more diversified industrial base, even if it entails some compromises on pure market efficiency. Lacking the massive, centralized state-driven investment seen in the U.S. or China, the EU appears increasingly inclined to leverage its considerable regulatory power (through instruments like the EU Space Act, the CER Directive, and the CRMA) and the scale of its single market to shape the space environment and protect its industrial interests. While the U.S. and China are engaged in direct, often confrontational, technological rivalry, Europe’s approach seems more focused on building internal resilience, upholding international norms where feasible, and seeking diversified partnerships. However, its complex, multi-stakeholder governance model (involving the EU, ESA, and national governments) can sometimes lead to slower decision-making and implementation processes compared to more centrally directed space powers.

Other Influential Space Actors: Adapting and Seizing Opportunities

Beyond the major space powers, other nations are actively navigating the turbulent geopolitical and trade environment, adapting their strategies to mitigate risks and, in some cases, capitalize on emerging opportunities.

India is notably positioning itself to benefit from global economic realignments. Its manufacturing sector shows potential for growth as companies seek alternatives to existing supply chains. In response to new U.S. tariff structures announced in April 2025, India has intensified its engagement in bilateral and multilateral trade negotiations, finalizing a Free Trade Agreement (FTA) with the United Kingdom in May 2025 and continuing talks with the European Union. Domestically, India is committed to enhancing its space capabilities and fostering private sector involvement through its Indian Space Policy 2023 and the Indian National Space Promotion and Authorisation Centre (IN-SPACe). Collaboration with the United States in space is significant, highlighted by the upcoming ISRO-NASA-AXIOM mission that will send Indian astronauts to the International Space Station in 2025, the joint NASA-ISRO Synthetic Aperture Radar (NISAR) mission scheduled for launch in June 2025, and the Strategic Framework for Human Spaceflight Cooperation concluded in 2024. The India-U.S. Strategic Trade Dialogue, initiated in 2023, aims to lower barriers to strategic trade and technology cooperation, including in the commercial and civil space sectors. However, existing U.S. export control regulations, such as ITAR, could potentially curb the extent of technological collaboration between the commercial space sectors of the two countries. In a more complex geopolitical maneuver, India has also reportedly become a transshipment point for some restricted technologies destined for Russia. This multifaceted approach suggests India is engaging in strategic hedging, strengthening ties with the U.S. in space while maintaining some level of engagement with other actors and pursuing its own independent capabilities.

Japan is focusing on strengthening its alliance with the United States in space while adapting its broader space policy to the new realities. Space cooperation has become a strategic pillar of the U.S.-Japan alliance, with deepened collaboration on satellite deployments, space situational awareness, and lunar exploration initiatives. A joint statement in February 2025 reaffirmed this robust partnership. Japan is increasing its defense budget, with significant investments allocated to dual-use space technology, aiming for enhanced interoperability with U.S. capabilities. Notable commitments include Japan’s substantial investment in the U.S. lunar surface architecture, such as a pressurized lunar rover (announced April 2024), and its contributions to U.S.-led commercial space station initiatives. Economically, Japan faces potential headwinds from possible U.S. tariffs, given its trade surplus with the U.S., and from an economic slowdown in China, its largest trading partner. In response to U.S.-China competition, Japan’s space policy is evolving to emphasize collaboration with overseas partners, particularly the U.S., on technology development and satellite defense, while simultaneously striving to develop indigenous space technologies to reduce dependency. This involves a delicate balance between managing its economic ties with China and pursuing its strategic alignment with the U.S..

Several emerging space nations are also making strategic moves:

The United Arab Emirates (UAE) is actively promoting its national space economy through initiatives such as the Space Economic Zones Programme. It is keen on fostering international partnerships and localizing advanced industries within its borders. The success of the Emirates Mars Mission (Hope Probe) serves as a testament to its growing space ambitions. The UAE was one of the countries affected by the original U.S. “AI diffusion rule,” which limited its access to certain AI components.

Australia is leveraging its rich mineral resources by partnering with the European Union on critical and strategic minerals, formalized by a Memorandum of Understanding in May 2024. These minerals are vital for aerospace and defense industries, and this partnership falls under the EU’s Critical Raw Materials Act. Australia’s national strategy also emphasizes the green energy transition and meeting the global demand for critical minerals. As a member of the AUKUS security pact, Australia benefits from eased U.S. export controls, which facilitates greater collaboration in space-related endeavors.

South Korea’s trade-dependent economy faces distinct challenges from U.S. tariffs and the broader U.S.-China technological rivalry, especially in its crucial semiconductor and AI sectors. In response, South Korean companies are notably increasing their investments in the United States (e.g., SK Hynix’s advanced semiconductor packaging facility). This trend is partly driven by incentives offered through the U.S. CHIPS Act and by concerns about U.S. export controls targeting China. Some analysts in South Korea argue that U.S. restrictions on China could create a window of opportunity—perhaps “four years to pull ahead of China”—for South Korea to advance its own capabilities in areas like semiconductors and AI, where it currently lags or risks being overtaken.

The global trade disruptions and the push for supply chain resilience are acting as catalysts for countries like India, and potentially South Korea and the UAE, to accelerate their domestic manufacturing and technological capabilities in strategic sectors. Countries geographically or industrially positioned between major competing blocs may find temporary benefits from trade diversion and “friend-shoring,” but they also face the long-term risk of being caught in the crossfire if geopolitical tensions worsen. Furthermore, while the U.S. aims to ease export controls for close allies, the inherent complexity and the “national security” lens applied to many dual-use technologies can still create hurdles for deep technological collaboration even with partners, as potentially seen in the context of U.S.-India commercial space technology transfer.

The Shifting Sands of International Space Cooperation

The current era of trade wars and heightened geopolitical competition is significantly reshaping the landscape of international space cooperation. Long-standing partnerships are being tested, new alliances are forming along geopolitical fault lines, and the very norms that have governed space activities are coming under pressure.

One of the most profound impacts is the mounting challenge to collaborative international space endeavors. The International Space Station (ISS), a symbol of post-Cold War cooperation, faces a transformative period. Russia has indicated plans to depart the ISS program after 2024 or by the end of the decade, a move that will fundamentally alter the station’s operational dynamics and international partnership structure. Sanctions have already severed most of Russia’s space-related ties with Western partners, with ongoing ISS operations being a notable but perhaps temporary exception. Adding to this uncertainty, NASA itself announced a pivot at the end of 2024, shifting away from a strategy of maintaining a permanent U.S. human presence in low Earth orbit via the ISS towards a model of intermittent access once the ISS is eventually deorbited. This decision has raised concerns about the future continuity of human spaceflight presence and vital microgravity research.

Joint scientific missions are also navigating a more complex environment. While some established collaborations continue—such as NASA-ESA astronaut training programs and the U.S.-India NISAR Earth observation mission—the broader atmosphere for initiating and sustaining large-scale international scientific projects is more challenging due to geopolitical tensions that are increasingly spilling over into the space domain. The ESA/NASA Euclid mission, for example, continues its astronomical survey, and while its 2024-2025 operational updates focus primarily on technical progress and data releases, the underlying strains on international scientific partnerships are a growing concern. Similarly, large-scale international projects like the Square Kilometre Array (SKA) radio telescope involve broad collaboration across continents, including nations like China and India alongside Western partners. However, the foundational documents for such extensive collaborations often predate the most acute phase of the 2024-2025 trade and technology conflicts, and the current climate could introduce new hurdles for component sourcing or data sharing.

Efforts related to space debris mitigation, a critical issue for the long-term sustainability of space activities, may also be affected. While recent U.S. export control modernization aims to facilitate American participation in the development of international standards, which could encompass debris mitigation protocols, the dual-use nature of relevant technologies presents a complication. Technologies for rendezvous and proximity operations (RPO), essential for active debris removal, can also be adapted for anti-satellite (ASAT) purposes. Consequently, restrictions on the transfer of such technologies could inadvertently hinder international cooperation on debris removal if certain nations are excluded due to geopolitical considerations. The era of broad, almost universal cooperation in major space endeavors, exemplified by the ISS in its prime, appears to be yielding to an era of more fragmented, bloc-based, or ideologically aligned partnerships, driven largely by these terrestrial trade wars and geopolitical rivalries.

A particularly stark illustration of this trend is the emerging geopolitical divide in lunar exploration. Two distinct, and potentially competing, frameworks are taking shape: the U.S.-led Artemis Accords and the Sino-Russian International Lunar Research Station (ILRS). The Artemis Accords, a set of non-binding principles intended to guide responsible behavior in space and on the Moon, had garnered 55 signatories by May 2025, including recent adherents like Bangladesh and Norway. These Accords underpin the NASA-led Artemis program, which aims to return humans to the Moon by 2027.

However, Russia and China remain conspicuously absent from the Artemis Accords. Russia has criticized the Accords as a U.S.-centric initiative that bypasses established United Nations frameworks for space governance. China, meanwhile, is effectively barred from direct NASA partnerships due to the U.S. Congress’s Wolf Amendment, which cites national security concerns. In response, China and Russia are collaborating on the development of the ILRS, envisioned as a rival lunar base to be established in the 2030s. The ILRS initiative has attracted its own set of international partners, reportedly 13 nations including Pakistan, Belarus, Venezuela, and South Africa—none of which are signatories to the Artemis Accords. This bifurcation was highlighted in April 2025 when China’s lunar program chief publicly accused the United States of actively interfering with its efforts to secure broader international cooperation for the ILRS, including with European nations. This competing vision for lunar exploration and presence raises serious concerns about a divided future on the Moon, with potential for friction or conflict over access to strategically valuable lunar resources or locations, such as water ice deposits at the lunar south pole. This lunar competition is becoming a new frontier for the broader terrestrial trade and technology rivalries.

These developments have profound implications for the future of global space governance and the establishment of widely accepted norms of behavior. Some analysts argue that existing space governance systems, largely rooted in Cold War-era treaties, are no longer adequate to address the complexities of the modern space environment, with its proliferation of new actors and advanced technologies. While the United States is in a strong position to influence the development of new norms, the lack of participation by other major space powers like Russia and China in initiatives such as the Artemis Accords calls into question the global legitimacy and ultimate effectiveness of such frameworks. The forthcoming EU Space Act represents a significant regional effort to establish more formal, legally binding obligations for space activities, potentially signaling a broader global trend away from purely voluntary guidelines. The “double dual-use dilemma”—where private space companies and their technologies can be readily militarized—further complicates governance efforts, especially when intertwined with national strategies like China’s Military-Civil Fusion policy. The increasing militarization of space and the continued development of counterspace capabilities by multiple nations directly challenge aspirations to maintain outer space as a domain for peaceful use. This widening governance gap, where technological advancements and emerging threats are outpacings diplomatic and regulatory responses, creates a precarious environment ripe for miscalculation and conflict.

The increasing reliance on commercial space capabilities for national security and critical infrastructure also places commercial entities in a vulnerable position, caught in the geopolitical crossfire and subject to a complex web of conflicting national regulations and pressures, thereby complicating their global operations and collaborations.

Summary: Charting a Course in a Fragmented Space Domain

The period of 2024-2025 has unambiguously demonstrated that the global space economy and national space strategies are increasingly susceptible to the dynamics of terrestrial trade wars and geopolitical competition. The escalating trade tensions, predominantly between the United States and China but with worldwide ramifications, have introduced a new layer of complexity and uncertainty into the space domain. These conflicts are characterized by widespread tariffs and, more critically for the space sector, highly targeted export controls on essential technologies such as advanced semiconductors and rare earth elements.

The primary impacts on the space economy are multifaceted. There has been a discernible increase in costs for space system development and manufacturing, affecting satellites, launch systems, and ground infrastructure. Supply chains for critical space technologies have become more vulnerable, leading to project delays and forcing a re-evaluation of sourcing strategies. Key commercial space markets, including satellite communications, Earth observation, and launch services, are all navigating these new economic realities, with implications for investment, growth, and service delivery. National security concerns are increasingly shaping space activities, sometimes overriding purely commercial or scientific objectives. This is evident in the intensified global pursuit of technological self-reliance, as seen in initiatives like China’s “Made in China 2025” and the U.S. CHIPS Act, and in the strategic use of export controls to protect or gain technological advantages.

Looking ahead, the trend towards a more fragmented and competitive multipolar space domain appears set to continue. International cooperation, once a hallmark of many large-scale space endeavors, is likely to become more bloc-focused, exemplified by the diverging paths of the U.S-led Artemis Accords and the Sino-Russian International Lunar Research Station. This fragmentation could make it more challenging to achieve global consensus on critical issues such as space debris mitigation, space traffic management, and norms of behavior in space. The “weaponization” of supply chains for critical space technologies will likely remain a prominent feature of the geopolitical landscape, compelling nations and commercial entities to invest heavily in diversification, domestic production capabilities, and alternative sourcing strategies. This strategic shift prioritizes resilience and technological sovereignty, often over pure economic efficiency or lowest-cost options, signaling a new paradigm where geopolitical competition is a primary driver in the space domain.

Innovation in the space sector may face a mixed impact: restrictions could slow progress in some collaborative areas, while simultaneously accelerating it in others as nations race for technological supremacy or develop ingenious workarounds to overcome controls. However, the long-term sustainability of the space environment itself could be placed at greater risk if unfettered competition overshadows cooperative efforts to establish and adhere to responsible space conduct. The future of space governance is at a critical juncture. The confluence of rapid technological advancement, the potential for increased militarization of space, and the fracturing of international cooperation creates an urgent need for new or revitalized governance mechanisms. Failure to address this gap could lead to increased instability, miscalculation, or even conflict in orbit. For the global space economy to continue to thrive and deliver benefits for humanity, navigating this new era of strategic competition will require a delicate balance between legitimate national interests and the imperative for international collaboration on shared challenges and the sustainable, peaceful use of outer space.

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