Trump Administration Considers Acquiring Stakes in US Defense Contractors

The Trump administration is considering acquiring equity stakes in US defense contractors, according to Commerce Secretary Howard Lutnick. The idea is being discussed after the administration acquired a 10% stake in Intel for $9 billion. Lutnick said that military leaders in the Trump White House are considering the economics of acquiring stakes in defense companies like Lockheed Martin, which makes 97% of its revenue from the US government.

The Trump administration is contemplating acquiring equity stakes in U.S. defense contractors, according to Commerce Secretary Howard Lutnick. This consideration follows the administration's recent acquisition of a 10% stake in Intel for $9 billion [1]. Lutnick revealed on CNBC's "Squawk Box" that military leaders are evaluating the economic feasibility of acquiring stakes in defense companies such as Lockheed Martin, which generates 97% of its revenue from the U.S. government [1].

Lutnick emphasized the need for a "monstrous discussion" about defense spending and highlighted the reliance of defense contractors on government contracts. He noted that previous government support to Intel, such as the grants provided under the CHIPS Act, was criticized for not being "fair" to the administration [2]. Lutnick drew parallels to international practices, citing the UK's nationalization of British Steel and the subsidization of automotive industries in Japan and Europe, suggesting that the U.S. should adopt similar strategies to remain competitive [2].

The Commerce Secretary also addressed the lack of a sovereign wealth fund in the U.S. and the ongoing discussion about defense spending. He expressed the need for a more structured approach to funding defense acquisitions. Additionally, Lutnick touched on monetary policy, stating that interest rates should be lower and that the market has learned to trust the Fed's competence in managing the economy [2].

While the Trump administration's proposal to acquire equity stakes in defense contractors is still in the discussion phase, it reflects a shift in the government's approach to supporting strategic industries. The move aims to ensure the U.S. remains competitive in the global market, particularly in defense and technology sectors.

References:
[1] https://www.foxbusiness.com/politics/trump-admin-weighing-equity-stakes-us-defense-firms-lutnick-says
[2] https://finance.yahoo.com/news/lutnick-says-trump-administration-consider-125700256.html