The global capital markets continue to react immediately to every word and action of U.S. President Donald Trump. Watching it makes one understand why he desperately sought to regain power. What does it feel like to hold sway over the world?
Recently, the reduction of the defense budget by the Trump administration has become a topic of discussion. The main points are to draft a budget plan that cuts 8% each year for the next five years. Key keywords for significant cuts include excessive bureaucracy, European and Middle Eastern military commands, and certain weapons systems. The Indo-Pacific Command, Virginia-class submarines, manned and unmanned aviation composite systems, surface ships, cybersecurity, ammunition, and air defense missiles have been excluded from the cuts.
While it is still uncertain whether the budget proposal will be adopted, the defense policy direction of the Trump administration can be discerned. European and Middle Eastern countries find themselves in a position where they must enhance their defense capabilities independently. Major countries in Europe are already preparing measures. British Prime Minister Starmer stated that defense spending, currently at 2.3% of gross domestic product (GDP), would be increased to 2.5% by 2027. The leading candidate for the next German chancellor, Merz, is reportedly in discussions for a special defense fund of 200 billion euros. Denmark also plans to allocate an additional 10 trillion won in defense spending, along with a rearmament declaration.
The securities industry analyzes that this situation may act as an opportunity for the domestic defense industry. This is due to the belief that European industrial capabilities alone will struggle to achieve a quick recovery of the defense industry supply chain. LS SECURITIES predicted that European nations may utilize Korean defense corporations as one of their options. Research Institute analyst Choi Jeong-hwan noted, "We can meet the demand for regional production by completing the establishment of cooperative production facilities with companies in Europe."
Korea Investment & Securities observed that, in line with the increased defense spending trend, the supply from European companies would become more concentrated within Europe, potentially lowering the intensity of competition in the Middle East and Southeast Asia. This implies a favorable environment for the Korean defense industry. Research Institute analyst Jang Nam-hyun also stated, "Additional exports are likely to occur, particularly focusing on countries that have previously purchased weapons systems," adding, "In the cases of Poland and Romania, Korean companies are establishing local production bases, which can be leveraged for additional exports."