Workers at BAE systems shipyard in Govan on February 13, 2011 in Glasgow, Scotland. Cuts in defense spending as part of the sequester could ripple to suppliers outside the U.S. - 

Sales are suffering as defense budgets are slashed all over the world, but the U.S. is a special case where over $40 billion in defense cuts are set to go into effect next month.

Francis Tusa, editor of Defence Analysis, says that will heavily impact on European defense suppliers.

"If sequestration goes ahead in the way we’re talking about it, they will see a rather heavy hit on turnover," says Tusa.

According to Tusa, that's because U.S. contracts are far more profitable than those in Europe.

The British defense contractor BAE Systems announced a fall in profits today. The company earns 40 percent of its revenue in the U.S. It says it may have to lay off 3,500 workers in its shipbuilding industry if Washington doesn’t stop the cuts.

Other European defense contractors, such as EADS, say as the American military’s budget shrinks, U.S. defense suppliers will vie for new contracts in Europe and elsewhere. In that case, the global defense industry could get a lot more competitive.