Trump pressures defense contractors on dividends while backing $1.5 trillion defense budget increase

President Trump signed an order tying defense firms' dividends, buybacks and executive pay to new factory investment, and he asked Congress to raise defense spending to about $1.5 trillion by 2027.

President Donald Trump signed an order requiring U.S. defense companies to increase investment in new factories and linking those investments to potential limits on dividends, buybacks and executive pay. At the same time, he has requested that Congress raise defense spending by about 50% to roughly $1.5 trillion by 2027. The combination places the defense sector between the prospect of much larger budgets and the risk of tighter rules on returning cash to shareholders. Market responses were mixed after the announcements, with some shares rising on budget news and earlier dips tied to concerns about limits on cash returns. Key points: - The presidential order ties required investment in new factories to possible restrictions on dividends, buybacks and executive pay. - The administration has proposed increasing defense spending to roughly $1.5 trillion by 2027, a roughly 50% rise from current plans. - The Pentagon has 30 days to review firms' results under the order and may later bar buybacks and dividends during periods of poor performance. - Industry experts and analysts warned this mix could unsettle investors and noted that the legal basis for limiting cash returns remains unclear. Summary: The administration's actions combine policy pressure to boost industrial investment with a proposal for a substantially larger defense budget. The Pentagon's 30-day review is the next procedural step, and congressional action on the proposed $1.5 trillion budget is pending.