Asian and European defense companies are outperforming American firms as their allies lose faith in Washington’s promises. Amid rising geopolitical tensions and defense budgets skyrocketing everywhere in Europe and Asia, weapon manufacturers in South Korea, Germany, and Singapore are experiencing torrential orders, analysts say, launching a decade-long defense boom.
In an era when alliances are being reassessed and tensions around the globe continue to rise, a quiet but significant change is afoot—one that’s diverting billions of dollars in defense spending away from the United States and towards Europe and Asia.
What’s driving it? A rising distrust of Washington’s decades-long position as the world’s military backbone.
In the last year, European and Asian defense firms have watched their shares skyrocket—some by more than 100%, as American defense behemoths Lockheed Martin and Raytheon go nowhere. Though all boats may float on rising worldwide military budgets, it’s the European and Asian defense shipyards, ammunition factories, and airplane hangars that are flourishing.
A Trust Problem in Washington
The trend has its roots in a deeper strategic rethinking, said David Roche, an old investor and strategist at Quantum Strategy. In an interview, he described that faith in the U.S. has really taken a hit, especially after recent political actions such as a perceived change of heart by former President Donald Trump towards Russia in the conflict in Ukraine.
“That readjustment created shockwaves,” Roche added. “States started reexamining whether or not the U.S. could be relied on.”
Royal United Services Institute (RUSI) director Trevor Taylor of the U.K. said the same thing. As a strategic measure, he explained, European nations previously bought arms from American producers on an unofficial pact that bolstered alliance relations. Today, he asserts, “If the U.S. does not wish to bear the cost of its allies anymore, why invest billions in their defense economy?
Instead, nations are increasingly looking inwards or towards close and confidant local partners in Asia for fighter planes, tanks, and weapons platforms.
The statistics are telling. Germany enacted a groundbreaking debt reform to clear the decks for an enormous defense splurge. Britain’s Prime Minister Keir Starmer has vowed to increase the country’s defense budget. And, in an exercise of regional solidarity, the European Union is outlining plans to activate up to €800 billion (roughly $883 billion) for defense.
The effect? An avalanche of orders to European companies, such as:
ThyssenKrupp Marine Systems: With expertise in naval systems, the company’s affordable customer base is projected to triple by 2030, says its CEO, Oliver Burkhard.
Rheinmetall: Famously known for manufacturing the Leopard 2 main battle tank, Rheinmetall is anticipating a defense sales boost of up to 40% this year.
“There’s more or less no limit anymore when it comes to the defense budget,” Burkhard said in an interview.
Asia Steps Up: South Korea, Japan, and Singapore in the Limelight
As Europe’s production pipeline fills up, nations are looking to Asia, particularly South Korea and Singapore, to satisfy record demand.
Hanwha Aerospace has signed significant contracts with Poland and Romania for its K9 howitzers.
Korea Aerospace Industries provided FA-50 fighter aircraft to Poland after the nation gifted older aircraft to Ukraine.
Singapore’s ST Engineering is currently manufacturing artillery shells for European customers, and as per CGS International, the company is “entering a multi-year earnings upcycle.”
South Korea’s defense industry, long in the shadow of international titans, has come out from the shadows. In March, Hanwha Aerospace unveiled a huge $2.5 billion rights issue to invest in shipbuilding, drone engines, and overseas expansion.
Even Japan, historically restrained in arms exports, is experiencing a stock boost among local defense firms. With an ambitious vision to raise defense spending to 2% of GDP by 2027, the nation is signaling a major departure from its post-war military policy.
Why U.S. Defense Giants Are Falling Behind
It’s not that the American defense industry is shrinking; it’s just not feeling the same level of explosive expansion that its equivalents overseas are receiving.
King Mallory, lead researcher at America-based think tank RAND, noted that since America has been the world’s largest defense spender for so long, the local demand has already been priced in.
Portfolio managers do not anticipate a radical change in American defense expenditures,” Mallory said. “But in Europe and Asia, it’s as if someone flipped a firehose.”
Weaponizing Independence
What lies at the core of that change is independence.
When nations purchase American arms, they’re frequently subject to End-Use Monitoring Agreements (EUMAs), which provide the U.S. with some level of influence over how and where those weapons are employed. For nations attempting to develop their own defense policy, this is a cause for concern.
Case in point: Forbes recently noted that the U.S. had temporarily suspended funding for F-16s it had donated to Ukraine, apparently crippling the aircraft’s radar jammers. For most countries, that level of control is a non-starter.
“If you’re going to have an independent defense policy, you need to make your stuff, or buy from someone who has your interests for the moment,” Roche said.
A New Era in Global Defense
This is not a short-term rebalancing. “It’s not the guns versus butter debate of the past,” Roche concluded. “It’s that we spent too much on butter and now find we have no guns.”
As global uncertainties, from the conflict in Ukraine to escalating tensions in the South China Sea, continue, nations are sending a message: they’re not waiting for Washington to secure their future.
With a record order pipeline, increased manufacturing, and geopolitical interests converging, the European and Asian defense boom is only just beginning. And the stock markets have already taken notice.
Final Insight:
In an ever more regional world of strategic autonomy, Europe and Asia are not only accumulating stockpiles, but stock momentum. While the U.S. is struggling with geopolitical skepticism, its allies are looking elsewhere—and investing where strategy meets money.
