By Haley Britzky, CNN
(CNN) — President Donald Trump issued a stark threat to defense contracting companies Wednesday, saying he would seek to limit stock buybacks and executive salaries unless they improve their delivery of weapons systems to the US military, hours before saying he’s decided to substantially increase the defense budget.
The pair of social media posts suggest that the Trump administration is aiming to squeeze the large defense contractors, or primes in industry parlance, while increasing defense spending to upwards of $1.5 trillion.
“While we make the best Military Equipment in the World (No other Country is even close!), Defense Contractors are currently issuing massive Dividends to their Shareholders and massive Stock Buybacks, at the expense and detriment of investing in Plants and Equipment,” Trump said in a post. “This situation will no longer be allowed or tolerated!”
Trump said no executive should “be allowed to make in excess of $5 Million Dollars.”
The news reverberated through Wall Street immediately as stock for the five major defense firms — Boeing, Raytheon, General Dynamics, Lockheed Martin, and Northrup Grumman — all began dropping.
But shortly before the markets closed, Trump followed the message about contractor restrictions with another saying that he has decided to increase the defense budget.
“I have determined that, for the Good of our Country, especially in these very troubled and dangerous times, our Military Budget for the year 2027 should not be $1 Trillion Dollars, but rather $1.5 Trillion Dollars,” he posted on social media.
Defense stocks, in turn, trended sharply upwards in after-hours trading, regaining much of their initial losses. It was not clear if a broader deal with Congress, which authorizes defense spending, has been reached. Trump attributed the ability to afford the increase to his tariff policies.
The White House and Pentagon did not immediately respond to requests for comments on more detail about the posts.
The issue of limiting stock buybacks, dividends and executive salaries has been in discussion in the White House for weeks, a source familiar with the matter told CNN, and had been expected to be announced via an executive order before Christmas. The plan was put on pause due to pushback by Treasury Secretary Scott Bessent and others about the impact to the stock market, the source said.
The major defense firms and some smaller companies were notified that an announcement was coming Tuesday evening in a call with Deputy Defense Secretary Steve Feinberg, the source familiar with the matter said, though what Feinberg relayed was far different from the president’s post on Wednesday. While Feinberg described the limits on stock buybacks and dividends as something that could be remediated and which would only occur if the companies did not deliver on their contracts, Trump’s post did not include those caveats.
It’s unclear how Trump intends to implement the restrictions on how defense contractors can spend their money. An executive order could still be imminent, though the source familiar with the matter thought the social media post could be an intimidation tactic to force the companies to the table for negotiations before finalizing anything.
If the restrictions were to be finalized and go forward, it would be an “extraordinary, unprecedented act of state capitalism” and an “intervention into the defense sector like nothing we’ve ever seen before,” Steven Grundman, former deputy under secretary of defense for industrial affairs and currently the founder and principal of Grundman Advisory, told CNN.
“It is right on the pathway towards nationalizing prime contracting,” Grundman