Shares of Lockheed Martin plunged after the US president said he may halve military spending
US defense stocks took a sharp dive this week after President Donald Trump announced that he could slash military spending in half. The announcement came amid a wider cost-saving push by his administration.
Companies which saw share prices fall this week include aerospace manufacturers Lockheed Martin (-4.86%) and Northrop Grumman (-6.58%) as well as General Dynamics (-5.30%), according to Friday’s trading data.
Speaking at a White House press conference on Thursday, Trump said he planned to discuss a potential reduction in defense budgets with Russian President Vladimir Putin and Chinese leader Xi Jinping.
“At some point, when things settle down, I’m going to meet with China and I’m going to meet with Russia… and I’m going to say there’s no reason for us to be spending almost $1 trillion on the military… and I want to say let’s cut our military budget in half,” Trump said.
Defense firms have enjoyed increased demand for weapons and military equipment since the escalation of the Ukraine conflict in 2022. Lockheed Martin, the primary producer of the F-16 fighter jets and Patriot missile systems used in Ukraine, posted a 21% year-on-year increase in revenues in 2023.
The new US administration has so far sent mixed messages on military spending. Trump has tasked Elon Musk and his Department of Government Efficiency with cutting federal costs, including at the Pentagon. The president has also pushed for a quick resolution of the Ukraine conflict, announcing imminent talks with his Russian counterpart Vladimir Putin.
The current $1 trillion in annual US military spending accounts for about 3.4% of the country’s gross domestic product (GDP). Secretary of Defense Pete Hegseth said during his confirmation hearings at the US Senate in January that he wouldn’t want to spend less than 3% of GDP on defense.
Russia has criticized the US arms sector for fueling global instability. Foreign Ministry spokeswoman Maria Zakharova claimed in September that soaring profits prompt defense firms to provoke new armed conflicts.
Meanwhile, claims have resurfaced in recent months about NATO weapons and ammunition being put on sale on the dark web. Conservative commentator Tucker Carlson alleged earlier this month that the Ukrainian military was selling American weapons systems on the black market, including to drug cartels.
In January 2024, a US Department of Defense Office of Inspector General report revealed that the Pentagon was unable to fully account for over $1 billion worth of military aid to Kiev. In 2023, CNN reported that criminals and arms traffickers in Ukraine had stolen some Western-provided weapons and equipment intended for troops.
