A model of the proposed paint scheme of the next generation of Air Force One is on display during a meeting between U.S. President Donald Trump and Canadian Prime Minister Justin Trudeau in the Oval Office of the White House June 20, 2019 in Washington, DC. (Photo by Alex Wong/Getty Images)
WASHINGTON— No one could predict the twists and turns of the first Trump administration, even for an area as obscure and mundane as the defense industrial base, and it would be a fool’s errand to try to do that for a second one.
[This article is one of many in a series in which Breaking Defense reporters look back on the most significant (and entertaining) news stories of 2024 and look forward to what 2025 may hold.]
Instead, let’s break down the current state of play in the political environment, look back at the first Trump term, and think about some of the major questions facing the defense industry during a second Trump administration:
Will Trump personally involve himself in defense acquisition, again?
For defense acquisition nerds, Trump’s first term was marked by his highly unusual personal involvement in weapons contracting. Whether it was his stated desire to return to “goddamn steam” catapults on the Ford-class carrier, interrogating Boeing executives on the possibility of buying a “Super Duper Hornet” F/A-18 variant, or having personal meetings with defense CEOs on Air Force One and F-35 contracts, Trump delved into the minutia of defense acquisition in a way that no US president had done in the modern era.
With the Wall Street Journal reporting that Trump has already spoken with Boeing CEO Kelly Ortberg about the Air Force One replacement program — as well as the return of the F-35 and drone warfare to the mainstream news cycle — it’s highly probable that we could see Trump once again try to make his mark on a program, putting pressure on defense contractors to highlight his deal-making skills to the American taxpayer. If I were a gambler, my money would be on Trump interference on big-name aerospace projects — most likely F-35 or Air Force One, again — but potentially also other fighter jets, including the Navy and Air Force’s sixth-generation fighter programs.
What happens with defense spending?
The fiscal 24 defense budget was constrained by the spending limits imposed by last year’s Fiscal Responsibility Act, and while final appropriations for FY25 won’t be passed until spring (at earliest), signs point to a budget that conforms to those limits.
Those restrictions will be gone in time for FY26 — the first chance the Trump administration has to shape the defense budget, albeit not from the bottom up. While the groundwork for the FY26 was performed by the Biden-era Pentagon, whether the incoming administration doubles down on that stagnant Pentagon spending or bumps it up could be a bellwether for its approach in future years.
Analysts who spoke to Breaking Defense immediately after the presidential election were split on whether Trump would be good for defense spending. Roman Schweizer, a defense analyst with TD Cowen, pointed to boosts in defense spending under the first Trump administration and cited support for higher toplines among Republican leaders on the defense committees.
However, whether defense budgets ultimately see a boost could be down to the interplay of House Republicans, as the razor-thin GOP majority in the House has given hardline fiscal conservatives enormous bargaining power.
The Department of Government Efficiency, spearheaded by Elon Musk and Vivek Ramaswamy, could be another fly in the ointment for defense spending hawks. Musk has declared his intent to use DOGE to slash $2 trillion from the federal budget. And although lawmakers, defense executives and military leaders have suggested they’re on board to cut wasteful spending (who doesn’t love government efficiency?), I don’t see defense companies lining up to suggest programs where they should receive less money.
RELATED: Such efficiency, very defense: Congress, industry waiting for Elon’s DOGE to wow
Is Trump a friend or foe to the defense industry, and who benefits?
During his last term, Trump got cozy with the defense primes, celebrating the business acumen of defense executives such as then-Lockheed Martin CEO Marillyn Hewson and — before the Boeing 737 MAX crisis — Boeing chief executive Dennis Muilenburg.
It remains to be seen whether any CEOs from legacy defense primes win Trump’s favor, but so far his regard seems to be centered on business leaders from the defense startup and venture capital world. The incoming president recently tapped Stephen Feinberg, who leads private equity firm Cerberus Capital Management, as deputy secretary of defense. Other executives from firms like Anduril and Palantir are also reportedly being considered for major roles inside the Pentagon, and Musk could be helping to cut Pentagon spending despite leading a major defense company in SpaceX.
One way this dynamic could play out is greater preference for inexpensive uncrewed systems — an area where defense startups have firm footing — instead of the exquisite, expensive weapons platforms traditionally made by defense primes. Pentagon leaders could potentially opt to sacrifice a discrete quantity of a major weapons system such as a single Virginia-class submarine or several dozen F-35s in order to buy hundreds of autonomous weapons and improved networks, Byron Callan, a defense analyst with Capital Alpha Partners, wrote in a Dec. 18 note to investors.
“The tension between GOP fiscal hawks and defense hawks will likely push the administration to look for lower-cost options for defense in the form of autonomous air and naval systems. The role of persons with defense tech/venture/start-up backgrounds in senior administration positions adds firepower to this battle,” he wrote.
Down further into the weeds are questions about the regulatory environment, changes to defense contracting, and how Trump’s overall trade policy influences defense contractors. The previous Trump administration took a more hands-off approach to antitrust enforcement, resulting in increased mergers and acquisitions, most controversially seen in Northrop Grumman’s purchase of Orbital ATK. (The Biden administration would later block a similar proposal for Lockheed to acquire Aerojet Rocketdyne.) Analysts speculate that the second Trump administration will revert back to a more permissive environment for M&A.
