Hampton Roads seeks opportunities amid federal policy changes

In March, a coalition of Hampton Roads business and government organizations wrote a nine-page letter to their congressional representatives pointing out areas of opportunity and risk as the Trump administration moved forward — and sometimes backward — on a wide swath of policies impacting federal employment, defense spending, trade and renewable energy.

Signed by the Virginia Maritime Association, the Hampton Roads Alliance, the Hampton Roads Chamber, the Hampton Roads Workforce Council and other regional groups, the letter aims to strike a balance between “optimism and concern” about the region’s future under President Donald Trump.

“We are living in an era of unprecedented national and global shifts, and Hampton Roads is uniquely positioned to thrive,” the signers wrote to U.S. Sens. Tim Kaine and Mark Warner, as well as U.S. Reps. Jennifer Kiggans, Jennifer McClellan, Bobby Scott and Rob Wittman. “Our national economy is amid a profound restructuring, beyond cyclical ebbs and flows, driven by large federal and private investments in three areas: the reconstitution and strengthening of our military, the re-onshoring of vulnerable supply chains and critical technologies, and the need for diverse energy sources and resilient infrastructure.”

As home to the world’s largest naval base and the nation’s biggest military shipbuilder, Hampton Roads is the “epicenter of our nation’s security interests,” the letter says, and is likely to benefit from building a larger military, but tariffs and federal workforce and defense spending cuts are major concerns for the community.
Hurdles to the continued growth of offshore wind and clawbacks of approved funding for environmental resilience and higher education programs are also areas of regional concern, the groups write.

A few months into Trump’s second term, the new administration’s fast-moving and wide-reaching federal policy changes have had a mixed impact on Hampton Roads.

Defense spending has mostly stayed the same or grown, and changes in federal offshore wind policy have not impacted Dominion Energy‘s Coastal Virginia Offshore Wind project, although in August the government withdrew $39.7 million allocated in 2023 to the Norfolk Offshore Wind Logistics Port.

But the president’s trade war and fluctuating tariffs, especially those on Chinese goods, are having an impact on trade at the Port of Virginia and raising costs for certain materials and projects, including CVOW. In May, Dominion Energy Chair, President and CEO Bob Blue said that higher tariffs could boost the wind farm’s cost to $10.9 billion.

Nevertheless, business leaders remain hopeful for the region’s economy and workforce.

“Uncertainty does create opportunity,” says Jared Chalk, chief business officer for the Hampton Roads Alliance. “There are areas of risk, but there’s also areas of opportunity that we can lean in and try to capture in the best way we can.”

The areas of opportunity focus on the military and technology. With continued conflicts in Ukraine and the Middle East, tensions in the Indo-Pacific, the climate crisis, the rise of artificial intelligence and federal upheaval, Chalk says there is a renewed focus on defense and reshoring critical technologies.

“Defense, knowledge work and cyber, energy and unmanned systems, and then transportation logistics are our bread and butter and what we’re focused on when you think about Hampton Roads’ economic position,” he adds. “We’re the 35th, 36th largest metro in the country, but the No. 1 [Department of Defense] spend per capita, and we’re in the top five of the total DOD contract spending behind New York, Boston, Dallas and D.C. So, we’re really punching above our weight in terms of that defense spending.”

Regional businesspeople and analysts also have high hopes for commercializing technology produced for the federal government to create further revenue streams — a necessity if defense spending goes down amid the growing federal debt.

Opportunity knocks

With three submarines and two aircraft carriers being built by NNS, along with ongoing ship repairs, there is a strong demand for skilled maritime workers.

The Hampton Roads Workforce Council has been training workers to meet that demand, says Shawn Avery, the council’s president and CEO. He notes that shipbuilding’s economic impacts ripple beyond the drydocks to second- and third-tier suppliers. Carriers need furniture, paint and many other items, and the more of that can be supplied locally, the better for Hampton Roads’ economy.

And the region’s strength in defense spending can be leveraged by attracting contractors that can also find customers in private industries.

In September 2024, Kongsberg Defence & Aerospace announced plans to invest $71 million to build a Navy missile assembly plant in James City County that will employ about 190 people. But the Norwegian company’s subsidiary also builds undersea robotics and unmanned surface vessels to inspect wind turbines and transatlantic cables.

“Many companies that we’re attracting and having conversations with are like that,” Chalk says. “They have a defense customer, but they can pivot to other things. Their sonar technology might work for defense, but it also works for commercial vessels.”

In 2021, Australia, the United Kingdom and the United States entered into the AUKUS agreement, in which the U.K. and the U.S. share nuclear propulsion tech with Australia, while the Royal Australian Navy agreed to acquire at least eight nuclear-powered submarines built by HII.

Early in Trump’s second term, Defense Secretary Pete Hegseth said he would continue the nation’s involvement in AUKUS, but in August, the DOD announced it would review AUKUS by this fall. Lawmakers from both parties have urged the White House to continue the partnership for national security reasons, but the agreement also means money for Hampton Roads.

“We view AUKUS as a critical near-term economic development opportunity to grow and diversify our military industrial base,” the Hampton Roads coalition’s letter says.

Beyond the sale of subs to Australia, Chalk notes that the region’s work for the nuclear Navy also places it ahead of the pack in terms of building small modular nuclear reactors, a technology on which Gov. Glenn Youngkin and other Republican leaders are pinning their hopes as energy demand increases substantially due to AI use.

“In Hampton Roads, we’re the only place in the world that’s building small modular reactors,” Chalk says. “We’re putting one on each sub and two on each aircraft carrier. So, we’ve got the talent, and we’ve got a pretty decent supply chain here in Virginia to pivot into the commercial sector there.”

Energy headwinds

Meanwhile, out on the ocean, CVOW is still on track to be completed by the end of 2026, Dominion Energy officials say, but it faces headwinds from Trump administration policies.

As mentioned, the Fortune 500 utility forecasts that construction costs for the wind farm could balloon by more than $506 million if U.S. trade policies remain in place through the end of 2026.

Meanwhile, the fossil-fuel friendly Trump administration has been notably opposed to wind energy, with one official calling wind farms “experimental,” “expensive” and “proven failures.” Under Trump, the federal government has moved to cancel construction of wind farms that have not completed the federal approval process, and the president has halted sales of ocean leases.

This has delayed development on two new ocean leases Dominion purchased last year in North Carolina — projects that were expected to produce up to 4 gigawatts of electricity.

Additionally, in August, the Trump administration issued a halt to construction of the nearly complete $4 billion Revolution Wind offshore wind farm off the coast of Rhode Island and Connecticut, citing the need to review the project for unspecified national security concerns. The administration also previously stopped work for several weeks on a New York offshore wind project.

While Dominion’s offshore wind farm enjoys bipartisan support from Virginia politicians, it’s unclear whether CVOW might fall under the same kind of federal scrutiny at some point.

And although CVOW and LS GreenLink’s $700 million subsea cable manufacturing plant in Chesapeake are still moving forward, other offshore wind investments have stalled locally, despite earlier interest, the letter says. “Wind energy business leaders are now taking a wait-and-see approach to further investment, given the uncertainty of the regulatory environment under the new administration.”

This uncertainty makes diversification from defense investment into private business a necessity, says Robert McNab, professor of economics and director of the Dragas Center for Economic Analysis and Policy at the Strome College of Business at Old Dominion University.

The author of an annual economic forecast for the region, McNab says that diversification “is a chance to play the long game. The battlefield is evolving with the use of drones. If the United States pivots towards unmanned systems that are cheaper than large-scale weapons system platforms, then large-scale systems like carriers may fall by the wayside over the long term.”

McNab sees opportunities in unmanned technology, both for the Department of Defense and the private sector. “Can we leverage this interest and money from the Department of Defense into these unmanned technologies, which also have civilian counterparts in terms of tourism, transportation, delivery, etc.?” McNab asks.

“Why do I say that? Because we know no tree grows to the sky. We know at some point in time the defense budget will come down,” he says, noting that defense spending in the region has doubled this century and is likely to decrease, given the ballooning national debt.

“If you diversify your economic base and you improve your economic resiliency and defense spending doesn’t go down, you’re just still growing faster,” McNab adds. “You’re matching the pace of Nashville and Raleigh and Jacksonville. But if you build out, if you prepare for [spending cuts] and it does happen, then you mitigate some of the worst effects. You don’t turn into a Pittsburgh after the steel industry collapses or Detroit after the auto industry downsizes.”

Ripple effect

The letter, also signed by the heads of the Hampton Roads Executive Roundtable, the Virginia Peninsula Chamber and the Hampton Roads Military and Federal Facilities Alliance, points to several other potential regional risks from new federal policies.

They may not be the headline makers, but federal spending cuts impacting Jefferson Lab, NASA, the Veterans Administration, the U.S. Coast Guard and the National Oceanic and Atmospheric Administration have cascading local effects that will be reflected later this year, McNab and others note.

So far, Northern Virginia has borne the brunt of federal job cuts in the commonwealth, while Hampton Roads has been sheltered by its defense economy, McNab says, but the coastal region will see an economic slowdown related to federal workers who took buyouts this year and officially left the government at the end of September.

Tariffs also could lead to more private sector layoffs, a trend already being seen among government contractors in Northern Virginia.

The Weldon Cooper Center for Public Service at the University of Virginia forecasts higher unemployment for the state later this year, edging up to an average of 3.9% in 2025 and 4.7% in 2026.

Meanwhile, traffic at the Port of Virginia has slowed amid the Trump administration’s trade war. “Volumes are a little soft at the moment, and that is a reflection of the current trade environment,” says Joe Harris, senior director of media relations at the Virginia Port Authority.

While the effects of tariffs accumulate over time, they are also nuanced, especially as Trump continually makes deals with individual countries, as well as increasing and pausing tariffs unpredictably.

Scott Swan, a professor at William & Mary’s Mason School of Business who has produced the Port of Virginia’s economic impact reports, sees “generally positive things among the chaos. It’s baked in right now that it’s probably some short-term negotiation ploy.”

As long as tariffs remain low, Swan says, the effects will be minimal for most industries. “If it changes dramatically from that, if they’re much higher than 10% on average, and if they last longer, then there’ll be … a resettlement about how companies are thinking about this. But the world economy is robust to the chaos right now.”

That resettlement means a realignment of trading partners, as well as fewer Chinese imports, although the United States and China have extended their tariff pause to Nov. 10 as negotiations continue.

But from early April to May 11, when the two countries agreed to their first 90-day pause, the U.S. placed a 145% levy on Chinese goods, and Chinese tariffs on U.S. exports stood at 125%, causing deadlock.

Nonetheless, the Port of Virginia has reacted smartly to this challenge, Swan says. In May, Virginia Port Authority CEO Stephen Edwards said Virginia’s port is “the least-exposed major U.S. port on trade with China,” as about 19% of all trade going through the port comes from China, as opposed to close to 45% of exports into the Port of Los Angeles.

Chalk, meanwhile, sees the disruption from the ongoing federal policy changes as an opportunity for the region to focus on its defense maritime industrial base and grow.

“We’ve got to lean into that,” he adds, “particularly when we see the next decade that there’s a renewed importance on the things that we do here in Hampton Roads.”