Lockheed Martin’s stock plummeted following President Trump’s statement about potentially halving military spending.
President Donald Trump’s announcement of a potential 50% cut to military spending triggered a significant drop in US defense stocks this week, part of a broader administration cost-cutting initiative.
Friday’s trading data showed declines in aerospace companies, including Lockheed Martin (-4.86%), Northrop Grumman (-6.58%), and General Dynamics (-5.30%).
During a Thursday White House press conference, Trump stated his intention to discuss potential defense budget reductions with Presidents Putin and 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.
Since the escalation of the Ukraine conflict in 2022, defense companies have experienced increased demand. Lockheed Martin, a major supplier of F-16 fighter jets and Patriot missile systems to Ukraine, reported a 21% year-over-year revenue increase in 2023.
The administration’s stance on military spending has been inconsistent. Trump has tasked Elon Musk’s Department of Government Efficiency with reducing federal costs, including Pentagon spending. The president has also advocated for a swift resolution to the Ukraine conflict, announcing upcoming talks with President Putin.
The current $1 trillion annual US military budget represents approximately 3.4% of the country’s GDP. During his January Senate confirmation hearing, Secretary of Defense Pete Hegseth indicated a preference for defense spending exceeding 3% of GDP.
Russia has criticized the US arms industry, alleging it fuels global instability. In September, Foreign Ministry spokeswoman Maria Zakharova asserted that high profits incentivize defense firms to instigate conflicts.
Reports of NATO weapons and ammunition being sold on the dark web have resurfaced. Earlier this month, Tucker Carlson claimed that the Ukrainian military was selling US weapons systems on the black market, including to drug cartels.
A January 2024 US Department of Defense Office of Inspector General report revealed that the Pentagon couldn’t fully account for over $1 billion in military aid to Ukraine. In 2023, CNN reported that criminals and arms traffickers in Ukraine had stolen some Western-supplied weapons and equipment intended for troops.