Following Donald Trump's victory in the 2024 presidential election, European defense stocks have experienced a significant surge. Companies such as Leonardo SpA saw their stock rise by 17%, Rheinmetall AG climbed 22%, and Hensoldt AG increased by 18% [9c3facd8]. This uptick is attributed to concerns over NATO funding and the potential for cuts in U.S. military aid, driving expectations for increased defense spending across Europe. German Foreign Minister Annalena Baerbock has been vocal about the need for substantial investments in European security, reflecting a broader sentiment among European leaders [9c3facd8].
A recent Koerber-Stiftung poll indicates that 73% of Germans support increased defense spending, highlighting a shift in public opinion towards prioritizing national security [9c3facd8]. Despite this, NATO statistics reveal that only nine European countries met the alliance's defense spending target of 2% of GDP in 2023, underscoring the challenges ahead [9c3facd8].
Goldman Sachs analysts have projected that Trump's re-election could lead to renewed demands for defense spending in Europe, estimating that an additional 0.5% of EU GDP will be needed annually to meet these expectations [9c3facd8]. Currently, the U.S. provides approximately €40 billion per year in military support to Ukraine, a figure that Trump may seek to reduce, thereby prompting European nations to enhance their own defense budgets [9c3facd8].
As NATO continues to navigate the complexities of its relationship with Russia and the internal dynamics of its member states, the question remains: Can Europe rise to the occasion in the face of growing threats, especially with the potential shift in U.S. support under a Trump administration? [447faccb]