Stock prices of US defense companies plummeted this week after President Donald Trump announced he might halve military spending. The announcement was part of a broader cost-cutting initiative by his government. According to Friday’s trading data, the aerospace and defense companies Lockheed Martin (-4.86%) and Northrop Grumman (-6.58%) as well as General Dynamics (-5.30%) saw their stock prices fall.
At a press conference in the White House on Thursday, Trump said he wanted to discuss the possibility of reducing defense budgets with Russian President Vladimir Putin and Chinese President Xi Jinping.
“Someday, when things calm down, I’ll meet with China and Russia and I’ll say, ‘There’s no reason for us to be spending almost a billion dollars on the military. and I’d like to say, let’s cut our military budget in half,'” Trump said.
Since the escalation of the Ukraine conflict in 2022, defense companies have profited from the increased demand for weapons and military equipment. Lockheed Martin, the main producer of the F-16 fighter jets and Patriot missile systems used in Ukraine, reported a 21% increase in revenue in 2023 compared to the previous year.
The new US government has sent mixed signals on military spending. Trump has tasked Elon Musk and his Ministry of Government Efficiency (DOGE) with reducing federal spending, including in the Pentagon. The President is also pushing for a quick resolution to the Ukraine conflict and has announced upcoming talks with his Russian counterpart, Vladimir Putin.
The current annual military spending of the US, at around $1 billion, makes up about 3.4% of the country’s gross domestic product (GDP). Defense Minister Pete Hegseth said during his Senate hearing in January that he would not settle for less than 3% of the GDP for defense.
Russia has accused the US defense industry of promoting global instability. The spokesperson for the Foreign Ministry, Maria Sacharova, claimed in September that the increasing profits would encourage defense companies to provoke new armed conflicts.
In recent months, there have been renewed allegations that NATO weapons and ammunition are being sold on the dark net. Commentator and podcaster Tucker Carlson claimed at the beginning of the month that the Ukrainian military was selling US-made weapon systems on the black market, including to drug cartels. In 2023, CNN reported that criminals and arms dealers in Ukraine had stolen some of the weapons and equipment intended for the troops from the West.