Donald's cocktail: Trump's new decree has caused discontent among the military lobby
US President Donald Trump signed a decree stating that he would limit the payment of dividends and the purchase of shares for enterprises of the military-industrial complex (MIC). This is a relatively new way of earning money, which, according to experts, brings good profits to both investors and top managers of defense corporations. Major players do not want to produce more weapons, although recently the White House has been actively trying to force them to increase production rates by allocating huge funds for this expense item. Izvestia explains the reason for the discontent of the lobbyists of the military industry and why Trump wants to increase the number of new weapons in the US arsenal.
Donald Trump's decree caused discontent among military lobbyists: reasons
In early January, US President Donald Trump announced that he would limit the payment of dividends and the buyback of shares in American enterprises of the military-industrial complex. Companies are now required to reinvest profits in expanding production capacity and accelerating the production of weapons. The head of the White House stated this on the Truth Social network.
"I will not allow dividends to be paid or buybacks to be carried out until these issues are fixed," the text of the message says.
Trump stressed that the enterprises of the American military-industrial complex produce weapons "not fast enough" and do not service products "properly." Contractors, according to the president, "pay huge dividends to their shareholders and carry out large-scale share buybacks to the detriment of investments in factories and equipment." The head of the White House also added that top managers of companies receive too high salaries, although all corporate income should be reinvested in production. In this regard, the annual income of the heads of defense enterprises should not exceed $ 5 million until the targets are reached.
Trump's statement caused an expected negative reaction from the largest players in the military-industrial complex market. Defense industry lobbyists pointed out a lot of inaccuracies: for example, the presidential decree does not have clear criteria on what can be considered "sufficient" reinvestment and how compliance with new requirements will be checked. "If you are trying to attract more enterprises to cooperate with the US Department of Defense, such actions are not the best way to do this. Companies may not want to do business with the Pentagon if they are subject to this law," the source told The Hill.
Today, almost the entire American military-industrial complex spends much more money on paying dividends and buying up its own shares (buyback) than on creating new weapons, fulfilling government orders or building factories. The other day, the analytical publication Breaking Defense published a study on investments of military enterprises. According to the data, in 2024, the American RTX corporation paid $3.2 billion in dividends. It was slightly ahead of another military-industrial complex giant, Lockheed Martin, which, in turn, spent $3 billion on dividends, $3.7 billion on buying up its own shares, but only $3.3 billion was spent on weapons production.
Moreover, for the whole of 2024, seven large military corporations, including RTX and Lockheed Martin, generated a total revenue of more than $21 billion and were able to return 98% of this total amount to investors through dividends.
Malek Dudakov, an American political scientist, told Izvestia that all Trump's attempts to "force" military companies to spend money on manufacturing products rather than on personal enrichment are being rejected. It is much more profitable for corporations to buy securities and pay dividends to investors than to spend on new contracts and government orders.
— Building a new production facility is always risky. Something may not work out: the contract is terminated, the weapons will not be the most advanced, and so on. The financialization of the American economy also plays a role here: it is more profitable to spin money in financial bubbles than to invest it in real production. Therefore, I strongly doubt that Trump will succeed in this regard. A lot of money is being invested in the American military—industrial complex to make it work more actively, but there are no major changes," the expert said.
Weakening positions
Bloomberg analysts said that the US military industry is currently losing ground in the global market. According to the agency's experts, the American military-industrial complex still continues to produce powerful weapons, but in some areas it has long lost its leadership. As an example, the researchers cited the production of hypersonic weapons: here the United States is inferior to Russia and China, which are among the world leaders.
Recently, the US Army missed its deadline for adopting the first American hypersonic weapon. It is clarified that the unit responsible for its operation has been trained, but the rocket itself, which cost more than $ 10 billion to develop, is not ready for use.
Back in November, Donald Trump demanded that defense companies should increase the pace of weapons production, since "every country wants it." However, the American military industry is currently experiencing a serious industrial crisis. Malek Dudakov noted that this situation is related to many factors, but corruption has become the most important of them.
— There is much more money in the American military-industrial complex than in any other country in the world, including China and Russia. It has long been much more profitable for the American military giants to produce expensive weapons in single or small batches than to produce something cheap and massive. The United States has faced a serious crisis over the past four years, including support for Ukraine and the crisis in the Middle East. Their arsenals are depleted, so big problems arise with the production of "simple" weapons," the expert explained.
In turn, Vladimir Vasiliev, chief researcher at the Institute of the USA and Canada, believes that the lack of competition has become the main problem of the American military industry. The main player in this arena is not the Ministry of Defense, as is commonly believed, but military corporations. At the same time, the Pentagon found itself in a controversial situation: on the one hand, it is also interested in accelerating production, and on the other, it depends on stable relations with contractors to maintain supply chains.
— Now it is almost impossible to restore the former competition among military corporations that existed during the Cold War. Until recently, the quantity of military products satisfied everyone, but when the issue of increasing production capacity arose, the situation became dramatically more complicated. For example, the production of new Tomahawk missiles remains at a minimum level — 50-60 units per year — although hundreds of them are needed. The American military-industrial complex itself is aware of this problem, but it still creates an uncontested situation for the state.: If there is no money, there are no weapons," the expert notes.
Expectations and reality
Last year, the index of aerospace and defense stocks rose 42% — twice the size of the NASDAQ 100 — amid expectations of increased government spending on fighter jets, missiles, drones and software. The US operation in Venezuela and Trump's plans to capture Greenland have reinforced the desire to acquire their own weapons stocks, which has led to an increase in the value of shares to the level usually inherent in high-tech companies.
Usually, such securities are considered by investors as "protective", since they are traditionally acquired during periods of uncertainty and ignored during growth. However, everything changed when Trump began to implement his foreign policy views, promising to strengthen the US defense capability, and at the same time provoking a new wave of discussions around the need to rearm Europe.
Another reason for the growth of the stock index was the ongoing crisis in Ukraine, which showed a fundamentally new form of armed struggle: new technologies and artificial intelligence are actively used on the battlefield. Vladimir Vasiliev shared with Izvestia the opinion that Trump not only wants to establish the defense industry and bring it to a new level, but also to overtake Russia. As a result, American companies found themselves in a difficult position: they are expected to make large investments, but there are no clear guidelines on what the administration will consider acceptable.
— Today, all American dreams — of a hypothetical victory over Russia, lucrative treaties and the most advanced weapons — do not represent the possibility of becoming reality. It is difficult to say how policy directives like Trump's decree will be implemented, since the idea of making a profit without production is already deeply embedded in the military-industrial complex. This is of fundamental importance to us today: the Americans do not have great economic opportunities to exhaust us in the arms race," the expert concluded.
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