In a lengthy post to Truth Social on Wednesday, President Donald Trump laid out a list of sweeping new rules for defense contractors hoping to be considered for government contracts, triggering a sell-off of stocks across the sector.
Trump said that he expected executive pay at defense companies to be capped at $5 million and temporary halts to be issued on dividend payments and stock buybacks until companies build “NEW and MODERN Production Plants.”
“Executive Pay Packages in the Defense Industry are exorbitant and unjustifiable given how slowly these Companies are delivering vital Equipment to our Military, and our Allies. Salaries, Stock Options, and every other form of Compensation are far too high for these Executives,” Trump’s post continued. “Defense Companies are not producing our Great Military Equipment rapidly enough and, once produced, not maintaining it properly or quickly.”
Since the president’s post Wednesday afternoon, defense contractor Lockheed Martin’s stock dropped 5%, followed by similar decreases at Northrop Grumman and General Dynamics.
In his post, Trump said the lack of regulations on defense contractors allows them to issue “massive Dividends to their Shareholders and massive Stock Buybacks, at the expense and detriment of investing in Plants and Equipment.”
According to reporting by Barron’s, defense contractors, including Lockheed, have paid out more than $7 billion in dividends and bought back $7.8 billion in stock in the last year.
In a subsequent post Wednesday evening, Trump called out aerospace and defense contractor Raytheon for being “the least responsive to the needs of the Department of War, the slowest in increasing their volume, and the most aggressive spending on their Shareholders rather than the needs and demands of the United States Military.”
“If Raytheon wants further business with the United States Government, under no circumstances will they be allowed to do any additional Stock Buybacks, where they have spent Tens of Billions of Dollars, until they are able to get their act together,” Trump continued.
A handful of Republican lawmakers spoke out in support of Trump’s new rules for defense contractors.
“America’s military continues to be the best in the world, but there is always room to improve,” Rep. Dave Taylor of Ohio posted to X. “We need to be building ALL of our military equipment in the U.S., and they need to ALL be made by U.S. companies.”
The White House did not expand on how the administration plans to enforce Trump’s demands. During a November speech to military members from across the country, Secretary of Defense Pete Hegseth said defense companies should invest their own money to improve the speed and volume of production.
“The Department of War will only do business with industry partners that share our priority of speed and volume above all else,” Hegseth told the audience, which included major defense contractors.
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