Al Root

President Donald Trump said Thursday that U.S. military spending could be cut in half, according to media reports. Shares of defense firms dropped on the news.

"There's no reason for us to be spending almost $1 trillion on the military," Trump said while talking about China and Russia, according to the reports. Trump added: "One of the first meetings I want to have is with President Xi of China and President Putin of Russia. I want to say let's cut our military budget in half."

The White House didn't immediately respond to a request for comment.

Lockheed Martin stock dropped $10 on the comments, leaving shares down almost 1.5% on the day at $435.36. The S&P 500 and Dow Jones Industrial Average were up about 0.9% and 0.8%, respectively.

Shares of General Dynamics, Northrop Grumman, and L3Harris Technologies were down 2.4%, 2.5%, and 0.7%, respectively.

Shares of smaller defense firms Huntington Ingalls Industries, Kratos Defense & Security, and AeroVironment were down 0.9%, 8%, and 3.4%, respectively.

Boeing stock was up 0.6%. Boeing is a large defense contractor, though it has a larger commercial airplane business.

The U.S. currently spends roughly $1 trillion annually on national defense, according to Federal Reserve data. That is about 3.4% of current gross domestic product.

Trump has sent mixed messages on defense spending recently. His newly created Department of Government Efficiency is looking to eliminate government waste, including potential waste at the Pentagon. What's more, DOGE head Elon Musk has been critical of the F-35 jet fighter, one of the largest programs in the Defense Department.

Defense Secretary Pete Hegseth, however, said during his confirmation hearings that he wouldn't want to spend less than 3% of GDP on defense. The European Union spends about $300 annually, or about 1.6% of GDP.

Defense stocks haven't handled the ambiguity well. Through late Thursday trading, Lockheed stock was down about 20% since the Nov. 5 presidential election.

Write to Al Root at allen.root@dowjones.com

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February 13, 2025 15:55 ET (20:55 GMT)

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