US President Donald Trump recently hosted executives from seven major defense contractors at the White House — an effort to shore up the sector as the war with Iran intensifies.
The conflict has exposed strains within the US defense industrial base. There are concerns over stockpiles of long-range missiles and air-defence interceptors and about the sector’s ability to ramp up production if the conflict is prolonged. Trump said he discussed “production and production schedules” with companies including Lockheed Martin, RTX (Raytheon), BAE Systems, Boeing, Honeywell Aerospace and Northrop Grumman. Reports suggest negotiations between the Pentagon and top contractors for new production have not progressed as quickly as the White House wants amid existing tensions.
Tensions between Trump and defense suppliers
Byron Callan, a defense stocks analyst at Capital Alpha Partners, says a persistent criticism of US defense majors is that they have been “risk-averse,” prioritizing returns to shareholders rather than reinvesting to boost capacity. “There was criticism that the largest defense contractors in the United States had been lethargic, that they were not anticipating need and investing and taking risk,” he told DW.
Before the US began aerial strikes on Iran, tensions were already simmering between the Trump administration and major defense suppliers. Trump has repeatedly criticized companies for favoring shareholder dividends and executive pay over investment in factories and production. He has also attacked firms for missing deadlines and running over budget. He singled out RTX as “the slowest in increasing their volume, and the most aggressive spending on their shareholders rather than the needs and demands” of the US military, and threatened to remove companies from government contracts if they did not increase factory investment.
In January, Trump issued an executive order banning defense companies from paying dividends or buying back stock “until such time as they are able to produce a superior product, on time and on budget.” The administration is also in a dispute with AI start-up Anthropic over military access to its Claude chatbot, reflecting broader friction over suppliers and national security priorities.
More production, and faster
Trump has specifically accused firms of under-investing in factory capacity in favor of stock buybacks. Stock buybacks occur when companies repurchase their own shares, reducing publicly available shares and potentially raising the remaining shares’ value.
Demand for US-made weapons surged after the wars in Ukraine and Gaza, and Trump previously criticized companies for not meeting that demand rapidly enough. “We have many people [who] want the F-35 fighter jet, and it takes too long to deliver them to allies or to ourselves,” he said. “The only way they’re going to be able to deliver them is if they build new plants. They don’t want to build new plants because it’s expensive.”
Philip Sheers, associate fellow with the Defense Program at the Center for a New American Security, says investment in the US defense industrial base is increasing, especially in munitions and air defense, but warns it will take time for investments to yield higher production rates. “Standing up new facilities or increasing supplies of raw materials can take years, and we’ve seen that with many of the facilities that are still being built in the wake of the war in Ukraine,” he told DW.
Sheers places a significant share of the blame for sluggish production on the US government’s recurring failure to pass budgets on time amid political infighting. “If the US government wants the defense industrial base to move fast, it needs to pass and appropriate budgets on time so that contracts can be signed, resources can be allocated, and industry can be incentivized to move,” he said, calling delayed budgeting a “geopolitical own goal of potentially historic proportions.”
Byron Callan warns that the administration’s push for investment could be undermined by budget uncertainty. Polling suggests Democrats may regain control of Congress in the 2026 midterms, which Callan says “could really put a cap on defense spending.” He argues a Democratic-controlled Congress might prioritize non-defense spending such as healthcare and infrastructure, especially given public fatigue with the war.
The US allocated $850 billion toward defense in its 2025 budget, with projections of $900 billion in 2026. Trump has called for $1.5 trillion in 2027, a level many experts view as unsustainable given US debt concerns.
Iran: a potentially prolonged conflict
The defense sector is bracing for the possibility the Iran war could last far longer than initially anticipated. Kenneth Adelman, US ambassador to the UN from 1981 to 1983, recalled how the Iraq War’s protracted nature altered his outlook and warned the Iranian conflict could become similarly drawn out. “Iran has been planning for this for a long time,” he said. “It has already gone on longer than the Pentagon has been planning. And I have no faith in how the Pentagon plans these things after what I saw in Iraq.”
A sustained conflict would likely mean increased orders for leading US defense companies and could buoy their share prices. The Trump family has also increased its own defense-related investments: Trump’s sons Eric and Donald Jr. have backed a new drone company aiming to capitalize on a US ban on new Chinese drones.
Market reaction and outlook
Since the Iran war began on February 28, US defense stocks initially spiked but have since retreated; the Dow Jones US Aerospace & Defense Index rose briefly at the conflict’s outset and has fallen about 3% since. While a prolonged conflict could lift demand for missiles, interceptors and munitions, converting that demand into production will require time, capital investment, reliable federal budgeting and smoother cooperation between the Pentagon and industry.
Edited by: Rob Mudge