The US defense industry is experiencing unprecedented growth at a time when President Donald Trump is unexpectedly sharply criticizing it for how it manages its finances.
A sector that generates nearly $1 trillion in economic activity annually and provides more than 2.2 million jobs is at the epicenter of the president's criticism over its dividend-paying and buyback practices. stocks.
In a series of posts on the social network Truth Social on Wednesday, Trump announced that he would not allow defense companies to pay dividends or make stock buybacks until they increase the production of military equipment.
ΠThe president also set a $5 million cap on top executives' salaries, while Firms do not use new, modern production facilities. Hours later, Trump signed an executive order formalizing these restrictions and tasking the Secretary of Defense (whom he renamed the "Secretary of War") with identifying companies that are not meeting their obligations.
Tomahawk for the manufacturer of the Tomahawk
The attack on RTH, the parent company, was particularly harsh. of Ruthenium, which produces popular weapons systems such as Stinger missiles, Soot drone interceptors and, most notably, Tomahawk cruise missiles.
Trump said that Ruthenium had been "the least responsive to the Pentagon" needs and warned that the company would lose its right to work with the government if it did not comply. RTX shares fell an additional 2% following these statements.
The irony of the quote is that the criticism comes just as the industry is booming. According to analysis by Raymond James, publicly traded U.S. defense companies have grown by 57.8% since September 2024.
Πmarket is expected to reach $447 billion by 2033, driven by geopolitical tensions, military modernization, and growing demand for advanced technologies. The US remains the undisputed world leader in the sector with a defense budget of $816.7 billion for 2023.
The growth is supported by conflicts in Ukraine and the Middle East, as well as tensions between the US and China. Companies like Lockheed Martin, Boeing, General Dynamics, and Northrop Grumman dominate the market, with Lockheed Martin and RTH alone projected to generate $43.5 billion in defense revenue by 2024. The industry's median salary is $115,000 per year, 56% above the national average.
Slow Giants
It's precisely this financial power that and the source of presidential dissatisfaction. North American Grumman took out $1.17 billion in stock buybacks and $964 million in dividends just for the nine months to September. Loskead Martin spent $2.25 billion on buybacks and $2.33 billion on dividends for the same period.
Meanwhile, CEOs of top companies earn more than $20 million a year - figures that Trump called "unfair" because of the slow production.
Trump's actions undo a long-standing rumor about the health of the American manufacturing base. Despite the high budgets, the production fails to satisfy the current global crowd. ΠProduction lines are overloaded, equipment deliveries are delayed, and supply chains are suffering from shortages of labor and materials. For example, the Pentagon is now demanding a fourfold increase in missile production.
What next?
The executive order gives the Secretary of Defense 30 days to identify companies in violation, after which they will have 15 days to submit a plan for improvement.
If the plan is rejected, the government can We take enforcement measures, including termination of contracts. Future contracts will include clauses prohibiting the repurchase of shares in the event of poor performance and tying executive compensation to on-time deliveries and increased production, not short-term financial incentives.
Hours after critics, Trump announced a plan to increase the defense budget to $1.5 trillion by 2027 - over 50% growth compared to current levels. This caused a sharp recovery in defense stocks in afternoon trading. Trump explained the ambition with smoke: "This will allow us to build the dream army, which we have long had the right to."