Trump's Federal Spending Freeze Puts $3 Trillion In Limbo, Threatens Industries Like Clean Energy, Defense, Health Care

The White House has ordered a temporary freeze on all federal grants and loans, putting $3 trillion in funding under scrutiny and setting the stage for a legal and political showdown over the congressional power of the purse that could heavily impact a wide range of industries.

The directive, issued Monday by the Office of Management and Budget and received by several media outlets, requires all federal agencies to halt disbursements while programs are reviewed for alignment with President Donald Trump's policy priorities.

This includes halting new awards, existing payment and funding for projects until reviewed.

The exact financial impact of the order remains uncertain. Budget experts cited by the Washington Post estimate at least tens of billions of dollars are at stake, though the White House directive suggests the total could be significantly higher.

Of the almost $10 trillion spent by the federal government in fiscal 2024, more than $3 trillion was federal financial assistance, Matthew Vaeth, acting director at the OMB, said in the memorandum.

“Financial assistance should be dedicated to advancing Administration priorities,” Vaeth said, adding that “the use of Federal resources to advance Marxist equity, transgenderism, and green new deal social engineering policies is a waste of
taxpayer dollars that does not improve the day-to-day lives of those we serve.”

The White House said that Social Security and Medicare remain untouched. The sweeping pause threatens funding for universities, nonprofits, contractors and private companies that depend on federal assistance.

“Nothing in this memo should be construed to impact Medicare or Social Security benefits,” the memo said.

The immediate focus will be on how agencies handle exemptions. The OMB memo allows federal departments to request case-by-case approvals, which means some funding may still flow, but the process is likely to be slow and politically charged.

Federal agencies have until Feb. 10, 2025, to provide OMB with detailed reports outlining which programs, projects, and activities are affected by the funding pause.

Legal, Political Showdown Over Federal Funds

The move is triggering legal challenges from nonprofits and Democratic-led states.

Within hours of the announcement, lawsuits were filed in federal courts in New York, Illinois and Oregon, arguing that Trump does not have the authority to withhold congressionally approved spending.

Senate Minority Leader Chuck Schumer was among the first to push back, saying Congress-approved investments are legally mandated and asserting the president lacks the authority to override the Impoundment Control Act of 1974, which restricts unilateral executive control over federal funds.

Trump has long argued that the 1974 law is unconstitutional, stating that past presidents had far more discretion over spending before its passage.

Which Industries Could Face Trouble?

Some of the hardest-hit sectors could include clean energy, defense, health care and education, where federal dollars have played a crucial role in driving investment and growth in recent years.

Trump's OMB memo explicitly targeted climate initiatives and green energy programs. Shares of solar and renewable energy companies were among the hardest hit following the federal funding freeze.

The Invesco Solar ETF TAN and the Invesco Wilderhill Clean Energy ETF PBW fell by 2% and 1.3%, respectively, on Tuesday.

Sunnova Energy International Inc. NOVA dropped 12%, Sunrun Inc. RUN fell 9.2% and SolarEdge Technologies Inc. SEDG declined 5%.

Defense contractors such as Lockheed Martin Corp. LMT, RTX Corp. RTX and Northrop Grumman NOC may also see rising uncertainty. While military spending is unlikely to be cut outright, several defense contractors rely on federal grants for research and development.

The impact on health care remains unclear. While Medicare is shielded, Medicaid funding — which supports hospitals, managed care providers and pharmaceutical companies — could be at risk.

HCA Healthcare Inc. HCA and Universal Health Services Inc. UHS fell by 1% and 1.4%, respectively, while Tenet Healthcare Corp. THC showed resilience Tuesday.

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