When Donald Trump announced, this Wednesday, that it would raise the United States defense budget until 1.5 trillion dollars in 2027 he was sending a political and strategic message. The jump, more than 50% on the current gamecomes after the military intervention in Venezuela and the announcement of total political and economic control of the Caribbean country, with open threats against Greenland and in an increasingly tense international scenario. The message is political and strategic: for Trump, the force It remains the main tool to order a world that it describes as unstable.
The impact was immediate. Wall Street reacted with marked increases in the arms sector, a sign that the markets assume that the announcement can translate into new million-dollar contracts, even before the plan passes the examination of the US Congress, which must approve it if the separation of powers is respected. The stock market response clashed, however, with the doubts that the announcement reopened about the sustainability of public spending.
Trump justified the increase as a matter of national security and assured that it would allow the country to be protected “independently of the enemy.” He also defended that the figure does not come out of nowhere, but rather from prolonged conversations with Congress. Even so, the volume of the jump (600 billion dollars more) brings back to the table an uncomfortable discussion in Washington: how much more can military spending grow without triggering a deficit that already weighs on federal accounts, and how far Trump is willing to go unilaterally.
If the proposal materializes, it would represent a large-scale leap. Both Trump and President Joe Biden, when he took over in 2020, increased military spending upon arrivalcontinued more discreetly for the next two years, and They slowed down at the end of their term. In his first time in the White House, Trump took over the US military budget. 626,000 million a 719 billionan increase of 15% that remains less than half (7%) adjusted for inflation.
For its part, Biden placed the defense budget at 875 billion in 2023, the highest since the end of the Cold War, pushed by the war in Ukraine and the rivalry with China. If Trump has his way, this jump from 50% in a single year would imply that the US would dedicate around 3% to more than 5% of its GDP to Defensesomething unprecedented in peacetime that would also force a reordering of economic and political priorities within the United States.
The false pretense of financing with tariffs
The president maintains that the increase in military spending can be financed thanks to the revenue from tariffs. According to his version, Washington can “easily achieve” the goal of 1.5 billion thanks to that collection, which he described as “tremendous.” It is an argument that Trump already used in his first term to justify increases in Defense and pressure allies.
The problem is that these tariff revenues already have other recipients, designated by Trump himself. The first ones that the magnate pointed out months ago were the sectors hit by his trade policy, especially the farmers those whom he has promised to reward. Furthermore, he says he wants to distribute checks up to $2,000 to citizens affected by the rise in prices of imported products, something would amount to 600 billion dollars a year according to calculations by independent American organizations cited by the ‘New York Times’.
Even so, the president reiterated that, if it were not for the flow of money from tariffs, the military budget would have barely risen a few 100,000 millionup to around a billion. The rest, he insisted, is possible thanks to this extraordinary collection, despite the fact that economists have been warning for some time that the gap between federal spending and income is at levels that are difficult to sustain.
The arms giants win
The markets did not wait for the political debate to clear up. The actions of Lockheed Martin, Northrop Grumman y Raytheon -three American giants of the defense sectorpillars of the military-industrial complex and historical suppliers to the Pentagon—rose more than one 5% at the close of Wall Street.
The momentum spread outside the US. In Europaa basket of defense stocks produced by Goldman Sachs advanced to a 3,8%and the movement also had an echo in Asia. They are companies closely linked to public spending on weapons and traditionally well positioned when Washington accelerates military investment, although Trump has now placed them under pressure.
In parallel with the budget announcement, the president threatened to tighten conditions for arms contractors: criticism of the share buybacksto the dividends already the “exorbitant” executive salarieswith the proposal to limit these remunerations to 5 million dollars annually. Raytheon was singled out as the company “least receptive” to the Army’s needs and warned of a possible breach of contracts if it does not accelerate production.
US President Donald Trump at a business forum for ‘America First’ / CRISTOBAL HERRERA-ULASHKEVICH / EFE
Pecking order
The budget jump occurs in the middle of a growing international tension. In recent days, and after the entry into Venezuela and arrest of Nicolas Madurothe US Army intercepted a tanker with russian flag for an alleged violation of sanctions. All of this provides a backdrop to Trump’s announcement to dramatically increase military spending, while exposing and creating new regional conflicts.
In Latin America, Trump has even threatened to exploit the Venezuela’s oil resources under military pressure. In the Arctic, he once again put on the table the possibility of annexation Greenlanda semi-autonomous territory of Denmark and a NATO ally, reigniting unrest between European partners.
The proposal must now go through Congress, where not everyone sees an increase of this caliber as viable or desirable. But the message has already been sent: more spending, more geopolitical pressure and a military complex that, at least for now, is once again trading upwards.
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