Demand for weapons in Europe has surged since the beginning of Russia’s full-scale war against Ukraine, The New York Times reports.
As US President Donald Trump’s administration gradually distances itself from cooperation with European countries, European states are shifting their approach to arms production.
Currently, Europe seeks to expand the global sales of its military products. This new focus on weapons manufacturing signals a generational change: after the Cold War, Europe has reduced its armed forces in favor of social investments.
Giancarlo Mezzanatto, a senior official at Leonardo and former CEO of the Eurofighter consortium, told reporters that due to Trump’s policy toward Europe, more countries are likely to start buying European-made weapons.
For instance, Poland and Türkiye are already considering multibillion-dollar deals for Eurofighter Typhoon jets, instead of expanding their fleets of American-made fighters.
“It is a matter of how successful the products are, and of how the technologies are helping the products to be successful in the market,” said Mezzanatto.
Even before Trump imposed sweeping global tariffs, shares of European defense companies had soared. Analysts believe this was partly because institutional investors, who had long ignored defense stocks, reconsidered their positions.
Specifically, the Stoxx Europe Total Market Aerospace & Defense Index, which includes major defense contractors like Leonardo, Rheinmetall, and BAE Systems, has risen by about 24% this year, while the S&P 500 has dropped by more than 10%.
Trump’s tariffs shook investor confidence almost everywhere. However, analysts view the defense sector as reliable, especially given the political push to rearm Europe.
In March, the European Commission announced a broad proposal to increase defense spending by approximately $840 billion, including $165 billion in loans. The European Investment Bank also said it plans to at least double financing for security and defense projects, including expanding funding for military equipment production.
For many years, European pension funds had banned direct investments in defense companies producing cluster bombs, chemical, nuclear, and biological weapons, as well as landmines.
However, everything changed after Russia’s full-scale invasion of Ukraine. NATO called on governments, banks, and private funds to invest in the defense industry to speed up weapons production.
One of the funds that relaxed its rules a few months after Russia’s invasion was Finland’s Varma. Even before Finland officially joined NATO in 2023, the fund decided it could invest in companies producing controversial weapons like cluster munitions, provided such weapons accounted for no more than 5% of a company’s sales.
Besides funding, Europe will need political will to strengthen its defense capabilities. Many major European arms manufacturers are partially state-owned, and each government has its own spending priorities, regulations, and defense strategies. This has led to inefficiencies, with national manufacturers producing relatively small quantities of weapons.
Additionally, European-made weapons often remain more expensive than their American counterparts. According to the Bruegel Institute, the cost of a European-built 155mm self-propelled howitzer can range from $6 million to $19 million.
Meanwhile, a similar self-propelled howitzer built in the US costs less than $2 million. The situation could worsen if a Trump-driven trade war causes the prices of steel, copper, and other crucial metals to surge.
