Trump Calls for Increased Military Funding While Warning Major Defense Suppliers

Trump Pushes for Massive Defense Budget Hike, Targets Major Contractors

Photo Credit: Nicole Combeau/Bloomberg

On Wednesday, President Donald Trump stirred controversy with a rapid series of social media statements, calling for an unprecedented $500 billion annual increase in defense spending. At the same time, he warned that some of the largest defense firms could be excluded from benefiting unless they met new requirements.

These conflicting messages triggered a sharp selloff in shares of leading defense companies, as investors scrambled to decipher the administration’s true intentions and the likelihood of these policies being enacted.

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Trump’s initial demand focused on a familiar theme: he insisted that major defense contractors working with the government must halt stock buybacks, suspend dividend payments, and limit executive compensation to $5 million annually—unless they increase investments in manufacturing and research to accelerate development.

Later that day, Trump formalized these demands through an executive order. In a separate online post, he specifically called out RTX Corp., the company behind the widely used Patriot missile system.

He warned that Raytheon, RTX’s defense division, would be barred from working with the Department of War unless it committed more upfront capital to expand facilities and equipment. This announcement sent shares of RTX, Northrop Grumman, Lockheed Martin, and General Dynamics lower.

Photo Credit: Nicole Combeau/Bloomberg

RTX declined to comment, while representatives for Northrop and Lockheed Martin did not immediately respond to inquiries.

It remains uncertain whether a president can dictate how private companies allocate their resources. Yet, even as he criticized RTX, Trump doubled down on his spending ambitions, urging Congress—again via social media—to raise the annual defense budget by over 50%, reaching $1.5 trillion for 2027.

“This will allow us to build the ‘Dream Military’ we have long deserved and, more importantly, ensure our safety and security against any adversary,” Trump posted online.

The sudden policy moves surprised many, though they echoed earlier comments from both Trump and Defense Secretary Pete Hegseth, who in November warned defense contractors to ramp up weapons production or risk becoming obsolete.

Despite these tough stances, the administration has relied heavily on defense firms while conducting military operations in countries such as Iran, Syria, Somalia, Nigeria, and Venezuela during Trump’s first year. According to the Military Times, at least 626 airstrikes have been carried out so far, not including the recent mission targeting Venezuelan President Nicolas Maduro.

Balancing Military Expansion and Contractor Accountability

Trump’s statements highlight a fundamental tension: he advocates for a larger, better-funded military, but also seeks to address persistent issues like cost overruns and delays in major U.S. weapons programs.

These challenges have become more pronounced with the rise of new technologies such as drones, as countries like China and Ukraine make strides in autonomous systems that the U.S. has struggled to match.

Just a day earlier, the Pentagon revealed that Lockheed had secured a deal worth billions to triple production of the most advanced Patriot missile variant, which is launched from RTX’s platform.

“This agreement represents a major change in how we rapidly scale up munitions manufacturing,” said Michael Duffey, the Pentagon’s undersecretary for acquisition and sustainment.

Analysts were quick to question whether Trump’s aggressive approach would actually resolve production bottlenecks.

“Why would this solve delays in manufacturing?” asked Byron Callan, a defense analyst at Capital Alpha Partners. “Could this drive away skilled managers from large defense firms and make the situation worse?”

Wednesday’s developments are the latest in a series of Trump’s interventions in major U.S. corporations. Earlier, the government took a 10% stake in Intel and permitted Nvidia to sell chips in China for a fee.

Last August, Commerce Secretary Howard Lutnick sparked a brief rally in defense stocks by suggesting the U.S. might acquire ownership stakes in some contractors.

“There’s a huge debate about defense,” Lutnick said on CNBC, noting that Lockheed Martin receives 97% of its revenue from federal contracts. “They’re essentially an extension of the U.S. government.”

Lockheed later clarified that 73% of its 2024 net sales came from the U.S. government, but Lutnick’s broader point remained.

If enacted, Trump’s proposed spending increase would be the largest in U.S. military history, with current national security funding set at $901 billion for this fiscal year. Any such move would require congressional approval, and Democrats remain skeptical.

“He can propose whatever he likes,” said Representative Rosa DeLauro, a senior Democrat on the House Appropriations Committee. “But this is where we make the decisions.”

According to the Peter G. Peterson Foundation, the U.S. already spends more on defense than the next nine countries combined. The administration has also encouraged startups and newer players in the defense sector, such as Anduril Industries.

Palmer Luckey, founder of Anduril, voiced support for Trump’s proposed regulations on defense contractors, including pay caps. His company has recently challenged established defense giants for Pentagon contracts.

“I pay myself $100,000 a year,” Luckey told Bloomberg Television.

Photo Credit: Bloomberg – Palmer Luckey, founder of Anduril Industries Inc., discusses his support for pay limits on defense contractor executives and his company’s growth.

Luckey added that if contractors fail to meet government targets, the public should have the right to impose restrictions. “If you’re funded by taxpayers, the public should be able to set whatever rules they want,” he said.

According to Jefferies analysts, major defense companies including Lockheed, RTX, Northrop, and General Dynamics spent nearly $50 billion on dividends and share buybacks in 2023 and 2024, compared to about $39 billion invested in research, development, and capital expenditures.

Analysts remain uncertain about how Trump could enforce these new rules and which companies would be affected.

“Would these requirements be written into contracts? It seems like an overreach,” wrote Jefferies analysts led by Sheila Kahyaoglu. “Contractors will likely resist, arguing for a balanced approach that rewards all stakeholders, including investors and customers.”

Reporting contributed by Roxana Tiron, Erik Wasson, Jen Judson, Anders Melin, Kiel Porter, Ed Ludlow, and Caroline Hyde.

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