New EU Plan To Boost Local Arms Production Would Freeze U.S. Out Of Hundreds Of Billions

Sparked in large measure by concerns that the U.S. is aligning itself closer to Russia, receding from its traditional ties with NATO and the stability of U.S. weapons exports, the European Union has created a new initiative to increase defense spending and drastically boost local arms production. The move to ‘buy local’ could effectively freeze the U.S. out of billions of dollars in potential arms sales.

Wrankled by U.S. President Donald Trump’s imposing tariffs and repeatedly saying that Canada should become the 51st state, Ottawa is deep into talks about joining this initiative.

The goals of the new “European Defense Readiness 2030” plan were laid out Wednesday in a white paper issued by the alliance. The initiative calls for increasing defense spending, simplifying regulations and streamlining industrial programs. It seeks the creation of an 800 billion Euro ($872 billion) pool of money to boost European arms production. That includes a suggested 1.5% of GDP increase in defense budgets which is anticipated to raise 650 billion Euros (about $709 billion) and 150 billion Euros ($163 billion) for the new Security Action for Europe (SAFE) loan program “to help countries invest in key defense areas like missile defense, drones, and cyber security,” according to the EU.

The European Union has created a new initiative to boost defense spending and local arms production. (EU)

“Traditional allies and partners, such as the United States, are also changing their focus away from Europe to other regions of the world,” the white paper states. “This is something that we have been warned about many times but is now happening faster than many had anticipated.”

While the loans will only be available to EU countries, “friendly states from outside the bloc may also take part in joint weapons purchases,” Politico noted.

“Joint procurement under the SAFE proposal is open to Ukraine; EFTA’s Norway, Switzerland, Iceland and Liechtenstein; as well as ‘acceding countries, candidate countries and potential candidates, as well as third countries with whom the [European] Union has entered into a Security and Defence Partnership,’” the publication reported

Neither the U.S. nor the U.K. are on those lists, meaning they are not eligible to sell arms under the new initiative.

The fact that Trump cut off the flow of arms and intelligence to Ukraine after a White House spat with Ukrainian President Volodymyr Zelensky set off alarm bells across Europe, raising concerns about the reliability of the U.S. as a partner.

Those worries were exacerbated by reports that U.S. arms makers could throw a “kill switch” on critically important exported weapons, rendering them inoperable, with the F-35 being at the center of those claims. Lockheed Martin, which makes the F-35, even took to social media to point out there is no such thing.

However, as we noted in a recent report, without access to American-controlled maintenance and logistics chains, as well as computer networks, any F-35 fleet would quickly start to become unusable and any jets that remain flying for a truncated period would only be able to do so with massively degraded capabilities. The loss of contractor support for any high-tech U.S. weapons export would suffer from the same fate to varying degrees.

Norwegian F-35s. (Ole Andreas Vekve – Royal Norwegian Armed Forces)

Concern over the future operability of his country’s F-35s led one Danish lawmaker to express buyer’s remorse.

“As one of the decision makers behind Denmark’s purchase of F35’s, I regret it,” Rasmus Jarlov said on X. “The USA can certainly disable the planes by simple stopping the supply of spare parts. They want to strengthen Russia and weaken Europa and are showing that they are willing to do tremendous damage to peaceful and loyal allies like Canada just because they insist on existing as a country.”

Aside from the issue of weapons, Trump has suggested he might withdraw about 35,000 troops from Germany, raising further concerns about American support.

The future of U.S. arms supplies and military presence in Europe is not the only issue the EU is considering. Threats from Russia and the ongoing war in Ukraine are major drivers for these actions. The alliance is also worried about challenges from China among other concerns.

“The moment has come for Europe to re-arm,” the white paper explains. “To develop the necessary capabilities and military readiness to credibly deter armed aggression and secure our future, a massive increase in European defense spending is needed. This needs to be coordinated and directed more effectively than ever between Member States, reflecting our collective strengths and addressing the weaknesses that come from uncoordinated action.”

The plan also notes that “cooperation with Canada has intensified and should be further enhanced.” That’s something the new government in Ottawa is seeking as well. In the wake of Trump’s actions and comments, Canada is investigating the possibility of seeking alternatives to the F-35, for instance.

Canadian Prime Minister Mark Carney on Monday said that he was reviewing Canada’s planned acquisition of 88 F-35s, “due to changes in the geopolitical landscape and a need to secure more domestic defense production,” The Wall Street Journal reported. “The current pact, estimated around $13.3 billion, was finalized in 2023 with deliveries.”

Should Canada join the new EU initiative, “it would be able to become part of the European military manufacturing roster, marketing its industrial facilities to build European systems like the Saab Gripen jet, a competitor to the American F-35, which is made by Lockheed Martin,” The New York Times noted, citing a Canadian and EU official.

Ottawa’s growing concerns about its neighbor to the south have resulted in Canada agreeing to purchase an over-the-horizon radar system from Australia to help guard the Arctic. You can read more about that in our recent story here.

In another symbol of the U.S. moving away from its long-standing ties to NATO, the Trump administration is considering “giving up the role of NATO’s Supreme Allied Commander Europe (SACEUR),” NBC News reported. The officer now in that role, Gen. Christopher G. Cavoli, also serves as the head of U.S. European Command and has been the primary commander overseeing support to Ukraine in its war against Russia. The move is part of a sweeping Pentagon effort to cut costs through a significant restructuring of combatant commands and other headquarters. 

U.S. European Command headquarters in Stuttgart, Germany. (EUCOM)

The financial markets have been taking notice of a potential European shift away from U.S. arms makers. European defense manufacturer’s stocks “have been surging for several months tied to expectations that the continent would procure locally more military hardware as the U.S. wavered on its support for the North Atlantic Treaty Organization,” MarketWatch reported.

There is still a long way to go before this new EU initiative produces any weapons. Until then, the U.S. will still receive the lion’s share of European defense spending, with growing competition from South Korea and Turkey as well.

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