The Rheinmetall Panther KF51, a tank that is expected to be one of many security assets invested in by the EU as a part of the Readiness 2030 plan.
An Unintended Consequence of Increased Allied Security Independence
American allies and partners are heeding the United States’ call to improve their defensive posturing and reduce reliance on the United States, but it may not materialize in the way the Trump administration was planning. As partner states seek to build up their indigenous defense capabilities, some non-American defense companies have emerged as alternatives to fill the new demand of American allies.
Between 2022 and 2023, 63 percent of all EU spending on defense procurement went to the United States. However, the days of European armies buying up such large amounts of American weapons technology are gone. The EU’s Readiness 2030 plan intends to shore up Europe’s defense industrial base, increasing military readiness and capacity to the tune of over $850 million.
Upon unveiling this spending plan, Ursula von der Leyen, President of the European Commission, spoke on the future of the EU’s dependence on American defense equipment:
“The era of the peace dividend is long gone. The security architecture that we relied on can no longer be taken for granted. Europe is ready to step up… We must buy more European. Because that means strengthening the European defence technological and industrial base. That means stimulating innovation. And that means creating an EU-wide market for defence equipment.” – Ursula von der Leyen, President of the European Commission
Despite countries across Europe and East Asia announcing their intentions to increase defense spending, it has not resulted in a boost to U.S. defense stock prices as some may have expected. Instead, as allies bolster their own industry, major foreign defense companies are seeing their stock market value skyrocket. Some of the largest defense firms in France, Germany, Italy, and Turkey have seen their stock prices nearly double in 2025. Notably, the stock value of Rheinmetall, a German arms manufacturer, has more than tripled since President Trump’s inauguration. Japanese companies like Mitsubishi and South Korean companies like Korea Aerospace Industries and Hanwha Aerospace are also seeing incredible market growth, particularly since South Korean defense firms began building security relationships with EU and NATO members upon Russia’s full-scale invasion of Ukraine.
U.S. defense companies are not seeing comparable growth. In a period of renewed global defense investment, American defense contractors like Lockheed Martin and Northrop Grumman have had their stock values fall by 14 percent and 6 percent, respectively. Exacerbating this issue is the fact that traditional U.S. allies are seeking overseas alternatives in security-adjacent technologies, even from potential adversaries. In April, the CEO of Irish airline Ryanair announced that the company would now consider purchasing Chinese Comac C919’s instead of Boeing 737’s in the midst of U.S.-EU trade tensions. Smaller countries and militaries are also moving away from the United States, with Thailand’s air force recently rejecting a U.S. bid to acquire a new squadron of American F-16 fighter jets in favor of the Swedish JAS-39 Gripen.
The United States has led the world in arms exports throughout the 21st century. Between 2020 and 2024, the United States increased their global share of arms exports from 35 percent to 43 percent, and for the first time in two decades, the United States exported more arms to Europe than to the Middle East. However, with the unveiling of the EU’s Readiness 2030 plan, that trend will most likely reverse. One anonymous American defense insider stated, “Our manufacturers are very aware that if the Europeans are serious, [American defense contractors] could lose out—and are not happy about it.”
Now, the question is, where will the United States make up the difference? Many of the top destinations for U.S. arms exports are in Europe, and top buyers in the Middle East are already purchasing American arms in large quantities. Donald Trump announced a landmark $142 billion defense and security deal with Saudi Arabia following his trip to the Gulf, but Saudi Arabia is already the largest destination for U.S. arms exports. Only time will tell if this strategy is sustainable in the long term.
The true fallout of this evolving situation is not yet clear. Stock value is an important indicator of a company’s perceived success, but more data is necessary to see how much this global shift towards localized defense production will harm the United States. Much of this data, such as revenue loss and production output, is published in reports from American defense companies, which will likely not be available for at least another month. Some of this lopsided growth may be due to the United States’ longstanding dominance of the international defense market, as smaller international companies are more incentivized to rapidly expand their production to catch up to larger U.S. industry giants.
If Washington continues to alienate its allies and turn against its long-standing security partnerships, it will only become harder for policymakers to rebuild trust in U.S. security guarantees, and new arms trade markets may become increasingly limited. While it is in the United States’ interest for its allies in Europe to have sufficient, self-reliant security infrastructure, it may not be in the best interests of the American defense industry.
Image Credit: “Rheinmetall Panther KF51“. Rheinmetall. CC BY-SA 4.0.
