Defense Stocks Plunge as Trump Suggests Massive Military Budget Cuts

Featured & Cover Defense Stocks Plunge as Trump Suggests Massive Military Budget Cuts

Defense stocks saw a sharp decline Thursday afternoon following remarks from President Donald Trump, who suggested that the United States could significantly reduce its defense spending.

Speaking at the White House, Trump proposed that U.S. military expenditures might be slashed by half in the future. His comments arose while discussing the possibility of holding a defense spending conference with China and Russia.

“At some point, when things settle down, I’m going to meet with China and I’m going to meet with Russia, in particular those two, and I’m going to say there’s no reason for us to be spending almost $1 trillion on the military … and I’m going to say we can spend this on other things,” Trump stated.

He further elaborated, “When we straighten it all out, then one of the first meetings I want to have is with President Xi of China and President Putin of Russia, and I want to say let’s cut our military budget in half. And we can do that, and I think we’ll be able to do that.”

Following Trump’s remarks, defense stocks that had previously been trading higher in the day quickly turned downward. Shares of Lockheed Martin dropped 1.6%, Northrop Grumman fell by 3.4%, and General Dynamics declined 2.1%.

Throughout his 2024 campaign and the early days of his presidency, Trump has sent mixed signals regarding military spending.

On one hand, he has enlisted billionaire entrepreneur Elon Musk and the so-called Department of Government Efficiency to identify areas where government spending, including defense, could be trimmed. Additionally, Trump has advocated for a swift resolution to the war in Ukraine, a conflict that has led to significant purchases of American weaponry.

Conversely, Trump has repeatedly emphasized the necessity of maintaining a strong military. He has signed an executive order to explore the development of an “Iron Dome of America” missile defense system and has frequently praised U.S. military capabilities. On Thursday, he reiterated, “Right now, people are confused by a number of different crosscurrents” on defense spending.

TD Cowen policy analyst Roman Schweizer commented on the situation, telling CNBC last week, “Right now, people are confused by a number of different crosscurrents” regarding U.S. military expenditures.

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