On August 21, 2025, President Donald Trump unveiled a bold new plan for Ukraine: a European-led peacekeeping force, with the United States providing airpower and logistical support but no ground troops. As reported by aInvest and confirmed by multiple European Union (EU) officials, this strategic pivot has sent shockwaves through both geopolitical circles and financial markets—especially the European defense sector, which now stands at the cusp of a transformative decade.
Trump’s announcement marks a major shift in U.S. foreign policy. By offloading the responsibility of ground troop deployment to European allies while still retaining American influence through air and intelligence support, the United States hopes to maintain its strategic interests without overextending its military. According to aInvest, this move is not just a diplomatic maneuver; it’s a catalyst for a seismic shift in European defense markets, triggering what some analysts are calling a “goldmine” for investors who understand the interplay between policy and defense spending.
At the heart of this transformation is the EU’s Readiness 2030 initiative, an €800 billion mobilization plan already in motion. The goal is clear: exponentially increase defense spending and create a robust, scalable defense ecosystem. This isn’t simply about buying more tanks or missiles. It’s about building reinforced infrastructure, deploying AI-driven logistics, and ensuring Europe’s military can operate independently at scale. The Security Action for Europe (SAFE) instrument, with its €150 billion loan facility, is accelerating procurement of critical systems such as missile defense, drones, and cyber capabilities. According to aInvest, these are not short-term spikes in demand; they are structural shifts that will redefine the European defense landscape for years to come.
Who stands to benefit from this new era? The winners are already emerging. German defense giant Rheinmetall has seen its stock price surge over 100% since the Russia-Ukraine war began, buoyed by lucrative artillery system contracts. Trump’s plan, with its focus on European self-reliance, further elevates Rheinmetall’s prospects, especially as the company onshores propellant production and plays a key role in EU mobility upgrades—think reinforced roads for military vehicles. France’s Thales is capitalizing on radar, drone, and cybersecurity contracts, while Leonardo of Italy is riding the wave of EU spending, particularly in radar and cyber, thanks to its partnerships with NATO and the EU’s Black Sea Task Force. Across the Channel, BAE Systems is benefiting from UK-EU security pacts and its access to the SAFE scheme, with its fair value estimate jumping to £22.50 per share, signaling strong institutional confidence.
Yet, the U.S. role in this new security architecture is nuanced. Trump’s insistence on “no U.S. ground troops in Ukraine” is a calculated move. By offering advanced airpower—such as Patriot batteries and F-35 support—and intelligence, the U.S. maintains its credibility as a global security guarantor while nudging Europe to take on more responsibility. As aInvest explains, this creates a “dual benefit”: European nations are compelled to invest heavily in their own capabilities, and U.S. tech firms indirectly gain access to European markets through partnerships and technology integration. For example, Thales’ radar systems paired with U.S. satellite networks could see a surge in demand, validating the EU’s push for strategic autonomy while still leveraging American innovation.
However, the picture is not without complications. On the same day as Trump’s Ukraine announcement, the European Commission confirmed that defense equipment would not be exempt from U.S. tariffs, despite a joint EU-U.S. framework agreement announced in July. According to a senior EU official cited by European media, “defense equipment will not be excluded from the U.S. tariffs,” though more carve-outs are expected as the U.S. expresses interest in “certain weapon systems” and semiconductors. The joint framework caps U.S. tariffs on European goods at 15%, with exemptions for aircraft and aircraft parts, but defense equipment remains subject to tariffs. Tariffs on cars and car parts will also drop from 27.5% to 15%, but only after the Commission proposes lifting tariffs on U.S. industrial goods. Both sides have agreed to cooperate on steel and aluminum overcapacity, but the specifics on defense procurement remain vague.
Interestingly, the joint framework includes a statement that “the European Union plans to substantially increase procurement of military and defense equipment from the United States, with the support and facilitation of the U.S. government.” However, as another EU official clarified, there are no details on this promise: “It is certainly not for the Commission to enforce, but it is something that we have discussed in detail with our member states and therefore we were able to frame it as such in the joint statement.” The text does not specify any amount, keeping the pledge to increase defense and military expenditure generic. The European Commission, which negotiated the tariffs, has no authority over the arms procurement of EU countries, as this remains a matter of national sovereignty.
For European defense companies, the implications are profound. The EU’s defense spending is projected to grow by €250 billion annually by 2030, with a remarkable 40% allocated to research and development. This presents a long-term opportunity for firms with diversified revenue streams and strong R&D pipelines. Rheinmetall, Thales, Leonardo, and BAE Systems are not just riding the current wave of spending—they are positioned to lead what could be the next industrial revolution in defense.
Yet, risks persist. Trump’s tendency to shift positions—balancing “America First” rhetoric with moments of transatlantic collaboration—could introduce volatility. European political fragmentation, with Germany’s fiscal caution and Italy’s reluctance to deploy troops, could slow spending. Still, the EU’s Defense Readiness Omnibus package, designed to streamline procurement and reduce bureaucracy, is considered a game-changer by many industry observers. The Russia-Ukraine war has already forced a reevaluation of modern warfare, with the underestimation of artillery consumption and the rise of low-cost drones. Companies that adapt to these trends—like Rheinmetall’s 155mm artillery or Leonardo’s drone detection systems—are poised to thrive.
For investors, the message is clear: this is not a short-term trade. As the EU races to build a self-reliant defense industry, the companies that can scale, innovate, and integrate with U.S. capabilities will dominate the next decade. According to aInvest, "the geopolitical tailwinds are here, and the market is only beginning to price in the full potential of Readiness 2030." For those with a long-term horizon, now may be the time to overweight European defense stocks.
As Europe and the United States recalibrate their security and trade relations, the defense industry stands at a crossroads—facing both the promise of unprecedented growth and the challenge of navigating complex political and economic realities. The next chapter in transatlantic defense, it seems, is just beginning to unfold.
