In a flurry of social media posts Wednesday, the president also said he would bar defense companies from buying back stock and issuing dividends until they invest more to develop new technologies and increase production. Later on Wednesday, the White House released an executive order to that effect.

In one of his posts, Trump said “long and difficult negotiations with Senators, Congressmen, Secretaries, and other Political Representatives” led him to determine that “our Military Budget for the year 2027 should not be $1 Trillion Dollars, but rather $1.5 Trillion Dollars…I would stay at the $1 Trillion Dollar number but, because of Tariffs, and the tremendous Income that they bring…we are able to easily hit the $1.5 Trillion Dollar number while, at the same time, producing an unparalleled Military Force, and having the ability to, at the same time, pay down Debt, and likewise, pay a substantial Dividend to moderate income Patriots within our Country!”

In reality, the tariffs brought in roughly $236 billion through November—less than half of Trump’s proposed spending hike. 

And far from paying down the national debt, the tariff income is dwarfed by last year’s federal budget deficit. 

“The national debt has risen significantly during Trump's first year, going from $36.2 trillion to $38.4 trillion, an increase of $2.2 trillion or nearly 6 percent”—the largest jump in recent years outside the pandemic, a recent USA Today analysis found.

In another post, Trump said, “Defense Companies are not producing our Great Military Equipment rapidly enough and, once produced, not maintaining it properly or quickly. From this moment forward, these Executives must build NEW and MODERN Production Plants, both for delivering and maintaining this important Equipment, and for building the latest Models of future Military Equipment. Until they do so, no Executive should be allowed to make in excess of $5 Million Dollars.” Also, he said, “I will not permit Dividends or Stock Buybacks for Defense Companies until such time as these problems are rectified…” 

Trump had particular criticism for “Raytheon,” likely a reference to RTX. In a subsequent post, he said the company would receive no further defense contracts until it invests more in production capacity, nor be allowed to buy back its own stock “until they are able to get their act together.” 

Boeing, Lockheed Martin, Northrop Grumman, and RTX did not respond to requests for comment on the president’s statements by publication. General Dynamics, HII, and L3Harris declined comment.

Trump didn’t specify how restricting buybacks or measuring research investments would be enforced. 

The president’s comments touch on a longstanding tension between the government, taxpayers, and defense companies, but they also omit existing efforts like acquisition reforms. 

“They're working to change incentive structures, which is one of, really, the strongest parts about the acquisition reform,” said Jerry McGinn, director of the Center for Strategic and International Studies’ industrial base center. “You want different outcomes, you change the incentives. And that's what they're working to do.”

Incentives can include bigger budgets, longer-term contracts, or cheaper loans—something the Pentagon is already doing. For example, Lockheed Martin is more than tripling its annual Patriot missile production from 600 to more than 2,000 as part of a seven-year deal announced Tuesday. 

The White House released an executive order to limit stock buybacks late on Wednesday. 

“Effective immediately, [defense contractors] are not permitted in any way, shape, or form to pay dividends or buy back stock, until such time as they are able to produce a superior product, on time and on budget,” the order states. 

In the next 30 days, the defense secretary must identify underperforming contractors “not investing their own capital into necessary production capacity, not sufficiently prioritizing United States Government contracts, or whose production speed is insufficient,” according to the executive order. 

There’s also a 60-day requirement to create a provision for future contracts that ban “any stock buy-back and corporate distributions” if the contractor isn’t performing to standards set by the defense secretary.

Mark Montgomery, senior director of the Foundation for the Defense of Democracies’ Center on Cyber and Technology Innovation, said he can see “the problem the president is trying to address in the shipyards. For a number of years, some of them have maintained a ‘backlog’ of ships—ships paid for but not built or even started—and yet we instinctively order more ships each year. The yards could use this backlog to justify investments in modernizing the yards—or they could use this future revenue to justify payments such as dividends or stock buybacks. They have all too often chosen the latter.”

The second Trump administration has so far keenly focused on defense manufacturing, and specifically shipbuilding, where yearslong program delays, workforce shortages, and supply chain challenges have increased costs. 

Navy Secretary John Phelan, like his predecessor, vowed to rein in costs and has pushed shipbuilders to perform and deliver on time. Phelan recently canceled the service’s frigate program, but then brought it back. The Navy also inked a deal with Palantir to install AI in shipyards to reduce costs, automate manual processes, and, ideally, build ships faster.  

Montgomery, a retired rear admiral and former policy director for the Senate Armed Services Committee, said Trump’s call to restrict buybacks and dividends could be part of a broader calculus to get expensive programs, like naval ships, on track. 

“A lot of problems need to be addressed to get our shipbuilding system back in order, and this action will certainly not do this alone, but it is part of an overall effort that includes more investments, partnering with successful Korean yards and more efficient design and acquisition processes,” he said. 

“We import the vast majority of our chemicals. How do we bring some of that back to the U.S.? And how is that chemical manufacturing base using biology available to the department when it needs to secure its supply chains and develop novel material capabilities? Those two things together are really the crux of what we're trying to accomplish,” said Doug Friedman, CEO of  BioMADE, a Manufacturing Innovation Institute sponsored by the Defense Department.

In November, the Pentagon shortened its list of critical technology areas from 14 to six. Coming in at No. 2 is biomanufacturing, which isn't typically in the same sentence as defense technology. But it can be used to make key materials for components of weapons and other materiel. 

This year, Friedman told Defense One, he wants to see how defense leaders try to integrate biomanufacturing with other priorities, such as logistics or hypersonics. 

“How can forward-deployed biomanufacturing help solve contested logistics? If you don't have to have a chemicals or material supply chain shipped across oceans, maybe you can manufacture at [the] point of need,” he said.  

A futuristic example of that could be housing a biomanufacturing platform inside a shipping container that runs on seawater, sunlight, and atmospheric carbon dioxide. 

“Now, you have a self-contained chemical manufacturing facility that doesn't need energy, it doesn't need water, and it doesn't need other inputs, right? Maybe that spits out diesel fuel. All of a sudden, you've fundamentally transformed the fuel supply chain for the department. That can't happen tomorrow, but we're certainly less than a decade away from that,” Friedman said.

BioMADE, which focuses on bioindustrial manufacturing, is also building three demonstration-scale biomanufacturing facilities in California, Iowa, and Minnesota so companies can increase U.S. production for both defense and commercial applications. The California facility is expected to open in 2027.

The 2023 National Defense Authorization Act greenlit funding for bioindustrial manufacturing facilities to be “regional hubs for the research, development, and the scaling.”

“What we see today is companies going—best case, to Europe; worst case, to China—to do these things, and so we're trying to develop this foundation that allows companies to scale these important defense products here, and that includes potentially scaling products that would feed into the organic industrial base,” Friedman said. “Manufacturing is about making stuff at scale. You actually have to take that technology and scale it up to credibly say that you're doing manufacturing.”

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Revitalizing Rocketdyne. Private equity firm AE Industrial Partners’ $845 million deal to take a 60 percent stake in L3Harris’ space propulsion and power business from Aerojet Rocketdyne, now called Rocketdyne, isn’t the only move the firm plans to make this year. 

• The deal, announced Monday, includes about five locations and 1,200 employees, Jon Lusczakoski, principal for AE Industrial Partners told Defense One. 
• The Rocketdyne name is “synonymous with innovation, and solving Space Challenges going back for 60 years,” Lusczakoksi said. “So we view this as…making sure that these types of national assets, these types of engineering teams and technicians and things like that stay here in the U.S.”

A little more: The RL-10 engine is one of Rocketdyne’s key assets and used to launch satellites and for deep space exploration. But the firm is also looking at hypersonic applications. 

• While hypersonic vehicles use different propulsion systems there could be opportunities given similar challenges of high-heat environments, fast-moving components, and difficult-to-test materials. Lusczakoksi said: “We'll be looking at hypersonic applications, whether that's on the engine side [or] vehicle side.”
• AE Industrial has space investments in Firefly Aerospace, York Space Systems, and Redwire—with plans to do more. This year, the firm will also look at other companies that can “feed into” its national security and space portfolios, Lusczakoksi said. 

New year, new factory tours. Defense Secretary Pete Hegseth kicked off a month-long nationwide tour of domestic manufacturing in Newport News, Virginia, on Monday. He spoke to shipbuilders and sailors, largely rehashing themes from last year.

• “I've made it crystal clear to the entire defense industry, which I didn't come from and I didn't work for, so I don't give a damn who wins. I just want the best,” Hegseth said. “And on this tour, we'll be traveling from the shipyards of the coast to the factories of the heartland to see the work being done by the military and our partners in American manufacturing to usher in a new golden age of peace through strength, a revival of our industrial base.”
• Hegseth also suggested some companies could see “longer, larger, more predictable contracts” if they “deliver on time and on budget…invest in their people, that invest in more capability and more capacity—not companies that invest in stock buybacks or CEO salaries or more dividends.”

Stock boost? Defense stocks are up domestically and in Europe since last weekend’s U.S. abduction of Venezuela’s, but the longer-term effects remain unclear. In a Jan. 4 analysis, Byron Callan of Capital Alpha Partners said that “inserting U.S. forces and supporting them could place additional demands on the DoD budget, and if Congress is unwilling to fund this operation, the Administration could use mandatory funding from the reconciliation bill. That would detract from investment." 

Making moves

• John Baylouny stepped up as president and CEO for Leonardo DRS on Jan. 1. A 30-year veteran of the company, Baylouny was most recently the chief operations officer. One of his chief priorities will be “accelerating next-generation R&D,” according to a statement. 
• Tory Bruno has landed at Blue Origin's new national-security group after his surprise resignation as CEO of the United Launch Alliance. Bruno oversaw ULA’s development of its Vulcan rocket and its turbulent path to be certified for national security launches. Blue Origin, owned by tech billionaire Jeff Bezos, is on its own certification journey for its New Glenn rocket; the Space Force requires four successful orbital flights, Space News reported in December.