Defense executives are concerned Trump’s proposed military spending spree might backfire

• In today’s CEO Daily: Diane Brady speaks with defense industry leaders regarding the military spending increase proposed by Trump.
• The big leadership story: The consequences of the Iran conflict continue to unfold.
• The markets: Predominantly higher as investors weigh uncertainty in the Strait of Hormuz.
• Plus: All the latest news and office gossip from .

(SeaPRwire) –   Good morning. This week, I have been contacting defense contractors, consultants, and current and former military personnel to gather their responses to Trump’s proposal to raise military spending by over 40% in his 2027 budget. I did not expect them to comment publicly: Who would want to boast about positive news while the country is engaged in a war?

What surprised me was the degree of pessimism and worry. Hearing this from four senior executives whose firms would benefit most from government expenditure offers insight into broader economic anxieties. While optimism about AI-driven productivity improvements is genuine, and there is backing for the president’s focus on innovation and bolstering U.S. military power, significant concerns remain:

Is this level of spending sustainable? My colleague Shawn Tully contends it is not: “If this spending surge occurs and the optimistic projections required to balance the new costs do not come to pass, America will move nearer to a fiscal disaster caused by a crippling increase in interest payments.” Given a $39 trillion national debt and public dissent over the strikes in Iran, resistance may emerge from multiple quarters: “We are currently in a volatile and perilous period,” an executive informed me on Monday, before the ceasefire. “To invest on this magnitude, you require stable commitments and a steady economy with sustainable growth.”

Are these priorities strategic? Similar to CEOs in other sectors, defense industry leaders have experienced fluctuating favor with this administration. There have been budget reductions that compelled executives like Booz Allen Hamilton CEO Horacio Rozanski to cut jobs, relationships harmed by DOGE, criticisms aimed at particular firms, and an executive order earlier this year capping stock buybacks and compensation at defense contractors. Some CEOs sense that policy decisions are personal and outside their influence. “I do not want to wake up to find myself or my company featured in a Truth Social post,” an executive said to me last night. “These partnerships are built over decades; the ideal is that it shouldn’t matter which political party holds office … I would not be so confident of that at present.”

Is the world a safer place? Like numerous Fortune 500 companies, leading defense contractors also operate with U.S. allies. Besides confronting more cyber-attacks during the war, they are seeing lost contracts in Europe and dealing with the fallout from America acting unilaterally. “The cliché is that defense companies desire conflict, but that is false … The situation is very different when you are mobilizing to counter a threat or ensuring national security.” Furthermore, concerning warfare, the rapid pace of AI is even more alarming. One executive told me he is as worried about the Pentagon’s prohibition on Anthropic’s technology as he is about AI capabilities and their development by potential rivals like China: “Warfare is going to transform,” he stated, noting that “it’s difficult to predict” exactly how.

Contact CEO Daily via Diane Brady at diane.brady@.com