President Trump’s decision to begin peace talks on Ukraine without participation by its European allies, followed by a move to freeze military aid and intelligence support for Kyiv, has stirred consternation among America’s NATO allies, as well as talk about building up their own defense capabilities while reducing dependence on the United States.
Bastian Giegerich and Ben Schreer expressed this sentiment on the website of the London-based International Institute for Strategic Studies (IISS):
“For European leaders, debating whether the transatlantic relationship can be repaired, complaining about the US or developing schemes to mollify Trump are distractions. Rather, the task should be to build up European defence capability; [and]
decide which technological dependencies on the US in military and civilian domains remain acceptable and which do not . . .”
The question is, does the European arms industry currently have the capacity to significantly reduce its dependence on U.S.-supplied systems? Does it produce the full range of systems, from combat aircraft and vehicles to logistics and communications systems? Have European military personnel had adequate training for scenarios in which the United States is not a major player? And is there a common understanding of what doctrine and which tactics would be most effective in the event of a Russian attack?
These are tough questions, and quick answers may not be possible. But one underlying question is whether Russia has any intent of moving beyond its bloody conflict with Ukraine, which highlighted some clear military weaknesses while imposing large costs in blood and treasure, to an invasion of the 32 member NATO alliance. It’s not clear Moscow will have the capacity to do so any time soon, even if Vladimir Putin harbored such intentions.
But, as happens all too often, military planners work from worst case scenarios, however unlikely. So there is much talk in European capitals about large increases in military spending in service of a more robust European defense capacity. Poland has been ahead of the curve, substantially increasing its military budget and securing tens of billions of arms offers from the United States and South Korea. In 2023 and 2024, Poland entered into negotiations to purchase $55 billion worth of arms from U.S. companies, including missile defense systems, HIMARS missiles, Apache attack helicopters, a variety of tactical missiles, and an upgrade of its U.S.-supplied F-16 combat aircraft.
New data from the Stockholm International Peace Research Institute (SIPRI) suggests that Poland is far from alone. U.S. arms transfers to Europe more than tripled from the period from 2015 to 2019 to 2020 to 2024. Recent deals have included Patriot missiles and Chinook heavy lift helicopters for Germany, F-35s for Greece, Romania and the Czech Republic, and tactical missiles and missile defense systems for the Netherlands. If these deals are sustained, European defense forces would be dependent on U.S. military technology for combat aircraft, missile defense systems, and tactical missiles for years, perhaps even decades to come. So one question is whether any major European nation will pull back from one or more of these multi-billion dollar deals in order to “buy European.”
The Wall Street Journal has reported that combined increases in military spending by European countries could reach $150 billion, potentially ushering in a boom for European arms firms. Stocks of major firms like Thales, Rheinmetal, and BAE Systems are already increasing. There has also been a surge of hedge fund investments in European arms firms on the assumption that the pledges of increased spending by European governments will be fulfilled, and that the funds will be spent primarily in Europe, rather than on weapons from U.S. suppliers.
But past pledges of increased military spending by major European powers have not come to pass, and the existing dependence of European militaries on U.S. suppliers for basic systems like combat aircraft and missile defense systems can’t be cast aside overnight. Granted, the Russian invasion of Ukraine, combined with the Trump administration’s signals that Europe needs to do more in its own defense or it will be on its own present unique circumstances. But spending alone will not guarantee a significant jump in defense capabilities unless the purchases are coordinated in service of a common plan in which different European nations play complementary roles, creating an efficient division of labor.
Investor enthusiasm for European arms stocks may be short-lived unless the new spending truly creates a coherent European defense structure, European firms supply a full range of defense capabilities, and some of the big deals already in the works with U.S. companies are rolled back to make room for European firms. It’s not as simple as just throwing money at the problem.
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