Rather than spend the money Trump squeezed out of them on a shopping spree for American guns and ammo, some European leaders instead see a chance to invest in weapons designed and manufactured at home, in hopes of one day luring customers from the US defence industry — much like how Airbus chipped away at Boeing Co’s dominance in passenger jets and, improbable as it once seemed, eventually surpassed its larger US rival.
“The deal in previous times had been that European countries accepted buying significant high-tech weapons from the US, and in return there was an implicit contract that the US would be present on the continent and defend Nato territory,” says Guntram Wolff, a senior fellow at Bruegel, an economic research group in Brussels.
Those purchases helped make the US defence sector the largest and most lucrative in the world, with US$318.7 billion ($411 billion) in military equipment sales to foreign governments in 2024. Trump frequently complains that Nato is ripping off the US. What he doesn’t mention is that European nations are the leading buyers of American-made weapons. The bottomless need for armaments to help Ukraine fight Russia has driven record sales. The US accounted for 64% of arms imports by European Nato countries from 2020 to 2024, compared with 52% from 2015 to 2019, according to the Stockholm International Peace Research Institute (Sipri). Last year, European Nato members spent a total of US$454 billion on defence, with the biggest share going to US companies.
That may, slowly, start to shift. “There is a very important debate across wide parts of the political spectrum in many European countries, about to what extent we need to increasingly emphasise and prioritise procurement in Europe,” Wolff says. “Including for the high-tech stuff where, at the moment, the dependency on the US is quite high.”
See also: Asia tilts toward steeper rate cuts as Trump tariffs drag growth
Looking beyond the US Several nations have already hit the brakes this year on major US arms purchases or are looking to alternatives made in Europe or elsewhere. After Trump’s trade threats and his jabs about turning Canada into the 51st US state, Canada announced in March that Prime Minister Mark Carney is re-evaluating a US$13 billion agreement to buy 88 Lockheed Martin Corp. F-35 fighter jets. His defence minister said the government would consider switching to fighters made by companies outside the US. “We should no longer send three-quarters of our defence capital spending to America,” Carney said in a June speech outlining the nation’s defence plans.
Poland, another regular buyer of US arms, negotiated a US$6 billion deal for a fleet of K2 tanks from South Korea’s Hyundai Rotem Co. They will be deployed alongside US-manufactured M1A2 Abrams tanks that Poland purchased from General Dynamics Corp. And Denmark is weighing whether to choose a missile defence system developed in France and Italy over the US-made Patriot system from RTX Corp.
“Europeans are very reliant on the US defence industry. But I think because of the tariffs, because of Trump’s attitudes toward Nato and his less-than-eager willingness to embrace the defence of Nato countries, European countries are increasingly going to prioritise investing in European defence firms,” says Todd Harrison, a senior fellow at the American Enterprise Institute, a conservative think-tank in Washington. Harrison says a push to develop defence manufacturing in Europe would also help justify Nato’s lofty spending levels to a wary public — “by showing that the money is going to build industrial capabilities and create jobs in their own country rather than creating jobs in the US”.
See also: Global mail services halt US deliveries ahead of de minimis end
Other governments are closely watching Denmark’s decision, expected later this year, as a barometer of Europe’s mood. Copenhagen has long been a steadfast US supporter and customer. Denmark buoyed the F-35 program in 2016 with a US$3 billion order for 27 fighter jets and has stuck with it despite years of delays.
That loyalty is now being tested. Trump has outraged Danish citizens with his repeated threats to take over Greenland, an autonomous Danish territory. Hans Peter Michaelsen, an independent defence analyst in Denmark, says it is likely Denmark will turn down the Patriot and go for the European-built system. “It would be a political signal,” he says, that it is time “to put new orders into the European defence industry”.
In an emailed statement, White House deputy press secretary Anna Kelly said the military spending pledge Trump won from Nato members “will allow Europe and the entire world to benefit from peace through strength”.
It is not clear whether Nato allies will make good on meeting the ambitious new spending goals or were merely mollifying Trump with a symbolic IOU that conveniently will not come due until long after he has departed the White House. Many countries would struggle to afford such a steep increase in military spending without falling afoul of the EU’s limits on deficits and debt. In 2024, the average military burden for all Nato members was 2.2% of GDP, totalling about US$1.5 trillion, according to Sipri. To hit the new target of 3.5% of GDP, defence spending for some Nato allies would have to triple.
Betting on Europe’s future as an arms producer
Much as European leaders may dream of quickly rivalling the US as the world’s go-to military supplier, it’s likely years away. “If European Nato had the ability to flick a switch and develop that capability overnight, it’s exactly what they’d want. But that’s the kind of thing that takes a decade to build,” says Andrew MacDonald, a specialist in defence budgets at Janes, a company that supplies intelligence on the defence industry.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
MacDonald points to the Patriot, which outsells alternatives built by European companies. “I don’t think there is an air defence system that has the range of capabilities that Patriot has,” he says. “So right now, if you want those capabilities, you’ve got to buy Patriot.”
The same goes for other complex armaments that are increasingly in demand. Some European offerings lag US products in features, battle readiness and price. Another advantage US defence companies often have over the competition: the manufacturing capacity to deliver the goods. “If European countries want to spend money quickly, the obvious answer is to look to the US,” MacDonald says, “because frankly, European productive capability can only expand so quickly.”
Recently, though, even some of the largest US defence companies have had a hard time keeping up with demand as weapons shipments to aid Ukraine depleted US and European stockpiles. Denmark is still awaiting six of the 27 F-35 fighters it ordered from Lockheed almost a decade ago. Poland bought those South Korean tanks partly because US-made tanks were not as easy to get. Buyers of the Patriot can wait years for delivery.
These delays may present an opportunity for Europe’s defence companies to win customers in need of alternatives to US products that have long backlogs. They would have better luck scaling up to do that if European governments decided to join forces, says Cynthia Cook, a senior fellow at the Center for Strategic and International Studies in Washington. “Notionally, European nations could get together. All of them together are as big as the US,” she says. “Working together, they could conceivably have a defence industry that was more competitive — sort of a second among equals to the US.”
This would be tricky to pull off, in part because of clashing national priorities and sclerotic European bureaucracy, but also because the simple clarity of “Made in America” versus “Made in Europe” is no longer simple at all. US defence companies have formed numerous partnerships with European arms makers as they look to expand their global presence and market share abroad. “Our industrial bases are integrated in a way that meets Nato standards,” says Dak Hardwick, vice president of international affairs for the Aerospace Industries Association, which advocates for the US aerospace and defence industry. “And the United States’ manufacturing capability continues to be the best manufacturing capability of any Nato country.”
Despite the hurdles, investors are betting on Europe’s future as an arms producer. Shares in European defence companies have surged this year, far outpacing their larger US counterparts. Germany’s Rheinmetall, a major producer of artillery ammunition, is up 177% this year.
It may be the last thing Trump ever contemplated — that he would inadvertently feed the growth of a foreign military-industrial complex that one day could match America’s. “We know from economic history that when there is a very urgent need, development increases rapidly,” Wolff says. “We might be at that moment.” — Bloomberg Businessweek
