It’s a business where “trust is a must”; you need to be absolutely sure that your defence materiels provider can be relied upon, particularly given the complex nature of many modern weapons, and the need for almost continuous software updates.
Trump has now destroyed confidence in Europe, and I would argue throughout the world except in Russia, in the United States as a trusted ally. This cannot be regained in the short to medium term; the US’s problems are systemic – they voted Trump in twice. Therefore its defence industry, which brings in something like $500B in foreign sales, is likely going to suffer mightily, and we are talking significant amounts of money even compared to tariffs!
This wont show up immediately in terms of revenue, many contracts are very long term and the businesses will have “inertia”, but Trump has absolutely ignored international treaties – both defence and free trade. One consequence is that national governments will not necessarily feel compelled to “play fair” if that is not how the counter party acts.
Early signs of a loss of confidence include Canada, Portugal and Switzerland’s review of F35 purchases and this can be expected to be the tip of the iceberg, with technocrats almost certainly reviewing each countries vulnerability to the US and how that might be reduced in the short, medium and longer term.
Meanwhile, the suggestion has been made that the US would probably veto the major competitor to the F35 in Canada and Portugal, the SAAB Gripen – by not providing export authority for the Gripen’s engine, the General Electric F414-GE-39E – as it did recently in Colombia.
If that were to happen then you can expect that any move away from US defence equipment to accelerate markedly. European manufacturers in particular are very capable of developing alternatives in the medium term. The potential is for very large job losses in US defence contractors, who are typically located in Republican (red) states.
And what does the best “canary in the coal” mine say – just look at the share price of US major defence contractors versus European defence contractors since November 2024.
