NATO Secretary-General Mark Rutte made a startling admission at the World Economic Forum last week…
Donald Trump is right.
Europe needs to do more to defend its own interests against Russia.
"He is right of course, that the problem is not the U.S. and the problem is Europe," Rutte said. "He felt that basically the U.S. was getting a bad deal and that Europe basically was funding its social model, its health care system, its pension system while we're underfunding in defense.”
The statement rings with irony because the Netherlands routinely failed to meet NATO's defense spending target of 2% of GDP when Rutte served as the country’s president.
However, just before Rutte left office to take over as NATO chief, the country ramped up its defense spending to ensure that’d no longer be the case. The Netherlands now intends to spend 10% more on defense this year than it did in 2024.
That money — an extra $2.7 billion — will ensure that the country not only meets but exceeds the 2% target.
That makes it the latest NATO member to bridge that gap, bringing the total to 25 of the alliance’s 32 members. That’s up from just three in 2014, but not quite everyone.
“The problem, of course, is that we are not yet all at that 2%,” Rutte acknowledged. “That's problem No. 1. Problem No. 2 is that 2% is not nearly enough.”
Problem No. 2 is an interesting one — and one I touched on earlier this month.
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In a not-so-subtle way Rutte seems to confirm reports that Trump will continue to push Europe to spend more on defense in his second term just as he did his first.
Trump himself made that clear in an Oval Office interview last week.
"One thing I do feel, the European Union should be paying a lot more than they’re paying,” Trump said. “The European Union should equalize. We’re in there for $200 billion more than the European Union. I mean, what are we, stupid? I guess the answer is yes. Because they must think so.”
As with a lot of Trump figures, I’m not sure where he’s getting the $200 billion figure from.
The European Union says it has spent $145 billion since the start of the war on financial, military, humanitarian, and refugee assistance to Ukraine, and has also committed to providing $20 billion in loans. That compares to $175 billion allocated by the United States.
Nevertheless, Trump’s position is clear: Europe needs to spend more.
And that’s not a point that’s being disputed. Across Europe, governments have come to that realization on their own, and they’re warming to the idea that paying more to the United States specifically could mollify a president that has traditionally demonstrated contempt for NATO.
As I said the number of NATO members meeting or exceeding the 2% defense spending target has shot up dramatically since Russia invaded Ukraine. But word is also coming down that Trump wants NATO members to raise the defense spending target from 2% of GDP to 5%, with 3% being seen as a potential compromise.
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And with respect to Ukraine, in particular, there’s the potential for another deal to be made entirely.
That is, Trump doesn’t seem at all interested in giving weapons and ammunition away to Ukraine at the expense of the American taxpayer. But if America’s European allies were to purchase arms and ammunition from the United States and give it to Ukraine themselves, then that would be just fine.
That transactional approach is what seems likely to replace American largesse going forward.
Or as a former Biden official put it:
You get to go out and say, we’re continuing to support Ukraine, and the Europeans are paying for it. The Europeans have the cash. They don’t have the stuff. That’s the problem, is they’ve run their stocks down, and they don’t have anywhere near the production capacity. It’s going to have to be the American defense industry who is continuing to power the fight, if Ukraine is going to stay in it.
No doubt, that would be a pretty shrewd political strategy.
It would drive an increase in Europe’s defense spending, fill the coffers of American defense contractors, and distance America from a geopolitical quagmire in Ukraine.
So, indeed, Trump may well be right in the end.
And if he is, it’s going to mean big gains for defense contractors. So be sure to sign up for Secret Stock Files to get in on the most cutting-edge defense tech firms.
Fight on,
Jason Simpkins
Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more...
In 2023 he joined The Wealth Advisory team as a defense market analyst where he reviews and recommends new military and government opportunities that come across his radar, especially those that spin-off healthy, growing income streams. For more on Jason, check out his editor's page.
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