Donald Trump’s second term in the White House could prove to be a defining moment for Europe. Trump has never been one to toe the line of conventional geopolitics. In his first term, he called NATO “obsolete,” openly questioned its purpose, and suggested that US support might hinge on whether member nations met their financial obligations. His return raises profound questions about America’s commitment to European security and could turbocharge Europe’s rearmament.
But this isn’t just about Trump. His rise is emblematic of a wider global shift: the cosy certainties of the post-Cold War era are gone, and with them, the naive hope that soft power and diplomacy could replace hard military strength.
The Decline of Europe’s Hard Power
Europe’s disarmament has been decades in the making. During the Cold War, European nations took defence seriously, with NATO members routinely spending 4-5% of GDP on their armed forces. This began to change in the 1970s, as détente with the Soviet Union ushered in an era of rapprochement. By the 1990s, with the Berlin Wall down and the Soviet Union dissolved, defence spending plummeted further.
The result was dramatic. Germany, for example, went from having 5,000 tracked vehicles in the 1980s to just 700 today—a staggering 85% reduction. Its navy has been similarly decimated, with its fleet shrinking by 65%. Other European nations followed suit, abandoning their hard-power capabilities in favour of a vision where diplomacy could maintain peace.
This embrace of “soft power” wasn’t just a strategy—it became a European ideology. As US policy analyst David Rieff observed, the European Union didn’t just adopt soft power as a diplomatic tool; it made it the very cornerstone of its self-image as a great power. Yet this dream began to unravel when Russia illegally annexed Crimea in 2014. The Kremlin’s full-scale invasion of Ukraine in 2022 delivered the final blow.
Trump and NATO: A Complicated History
Trump has long been sceptical of NATO, and his criticism is not without precedent. His demand that member nations spend at least 2% of GDP on defence predates his presidency, but his abrasive style forced the issue into the spotlight. Trump didn’t mince words: countries that failed to meet the target, he implied, might find themselves excluded from NATO’s mutual defence clause.
Such remarks sent shockwaves across Europe. For decades, NATO has been the cornerstone of European security, underwritten by the immense military and financial might of the US. Trump’s questioning of that commitment shattered the illusion that Europe could rely on America indefinitely.
The irony, of course, is that Trump’s antagonism may have done more to strengthen NATO than decades of diplomatic niceties. By 2023, 23 of NATO’s 32 member states had reached the 2% target, compared to just six in 2021. Poland is leading the charge, with plans to spend 5% of its GDP on defence by 2025—a staggering figure that harks back to Cold War levels.
A Shifting Geopolitical Landscape
Trump’s return should accelerate Europe’s military build-up. Yet the forces driving this transformation run much deeper than one man. The world is undergoing a structural shift, as the post-Cold War order gives way to a new era of great power competition.
Russia’s aggression in Ukraine is just one piece of the puzzle. In the Indo-Pacific, China’s increasingly assertive stance—particularly its ambitions over Taiwan—is forcing the US to pivot its military focus eastwards. Should a crisis erupt over Taiwan, America’s ability to defend Europe could be severely constrained.
This shifting balance of power is reflected in global defence spending. In 2023, military budgets worldwide surged by 6.8%, reaching an all-time high of $2.4 trillion. This is not just a response to immediate threats; it’s a recognition that the world is becoming more unstable, with nations bracing for challenges yet to come.
Europe’s Strategic Awakening
For Europe, Trump’s scepticism of NATO has been a wake-up call. The continent is finally taking steps to reduce its reliance on the US, embracing the concept of “strategic autonomy.” This isn’t just about spending more—it’s about rebuilding Europe’s defence industrial base and regaining control over its security.
Currently, the majority of Europe’s defence spending flows to non-European manufacturers, particularly in the US. This reliance has left Europe vulnerable to supply chain disruptions and dependent on foreign technology. The EU’s new defence industrial strategy aims to change this, with ambitious targets for boosting intra-European procurement. By 2030, at least 50% of the EU’s defence procurement budget is expected to go to European manufacturers, rising to 60% by 2035.
The Road Ahead
Europe’s military resurgence marks a profound shift in its approach to global security. The days of soft power are over. As nations ramp up their defence budgets and rearm their militaries, they are acknowledging the harsh reality of a world where hard power is once again paramount.
This rearmament isn’t just about responding to immediate threats like Russia. It’s about preparing for a world where the US might be less willing—or less able—to guarantee European security. Whether it’s Trump or another president in the White House, the lesson for Europe is clear: it must be ready to stand on its own two feet.
The renewed focus on defence has created a multi-year investment opportunity for European defence companies. Many firms in this sector are already reporting robust earnings growth. Investors are increasingly recognising the defence sector as a viable long-term theme, even from an ESG perspective. As former NATO Secretary General Jens Stoltenberg recently noted, “Without industry, there is no defence, no deterrence, and no security.”