Home
/ Insights
/ Articles
/ What Does EU’s €800B Defense Market Mean for US Companies

What Does EU’s €800B Defense Market Mean for US Companies

The European Union is rearming, a historic shift underpinned by the recent launch of the Security Action for Europe (SAFE) program, which allocates €150 billion in loans towards new defense procurement opportunities, as well as the relaxation of fiscal rules, to allow for greater investment in European defense at a national level. This significant investment, as part of the broader ReArm Europe Plan to mobilize up to €800 billion for defense spending by 2030, is not just about strengthening military capabilities; it is a profound strategic shift that creates a significant but also challenging market opportunity for U.S.-backed capabilities.

Evolving European Defense Landscape

Europe’s rearmament is a direct consequence of a changing geopolitical reality. Russia’s full-scale invasion of Ukraine served as a stark wake-up call, exposing vulnerabilities that had been papered over for decades. Today, we see a renewed commitment to collective defense, most recently underscored at the NATO summit in The Hague where allied nations pledged to boost their defense spending to an ambitious 5% of their GDP. For the EU, this drive is also rooted in a long-standing desire for “strategic autonomy” – the ability to act independently in matters of defense and security. The SAFE program – and other initiatives such as the European Defence Industry Programme (EDIP) – are designed to build a robust European defense industrial base and reduce reliance on outside powers while promoting a “buy European” agenda.

This policy framework is establishing a new competitive landscape for U.S. firms. The SAFE program is effectively designed to favor European suppliers and requires a different approach for U.S. firms targeting the European defense market. Specific rules within the program, such as the 35% cap on non-EU components and the need for Security and Defence Partnerships (SDPs), establish clear parameters for how U.S. innovators can participate. Further barriers on non-EU participation are expected within some member states. For example, recent forecasts from Berlin suggest that Germany’s plans for U.S. procurement only represent 8% of its new national rearmament drive, the vast majority destined for EU suppliers.

Yet, limits on non-EU participation are not an insurmountable barrier. The reality is that Europe’s ambitious goals – to close critical capability gaps and field modern systems designed to combat today and tomorrow’s threats – cannot be met without the advanced technologies offered by U.S. defense firms. Many of the most transformative technologies in defense, from cutting-edge AI-powered systems to advanced space-based solutions, are championed by U.S. defense innovators.

Opportunities for U.S. Companies in Europe’s Rearmament

A path forward exists for U.S. companies wishing to engage in Europe’s rearmament project. The new challenges presented for U.S. companies can be navigated through various strategies, including taking immediate action to accomplish the following:

Position yourself as a thought partner: Europe is acting quickly and you should be too. You should be promoting your technologies and innovations to EU institutional and member state authorities while advocating for interoperability, cooperation and collective security.
Understand the EU and its member states: It is crucial to grasp the structures and dynamics of EU and member state institutions to identify needs and opportunities, as processes vary depending on the product and the end customer (which is not directly the EU).
Find the right partners: If you are a U.S. defense innovator and you do not have European partners, you are already behind in the game. With the EU pushing for further technological and defense independence from the U.S., selecting the right European partners will be a necessary step to ensure long-term, sustainable access to European procurement contracts.
Identify the right opportunities: Large defense budgets are still to come, and there will be many more procurement opportunities across different jurisdictions. It will be important to understand what capabilities customers are looking for, who the competition is, and what differentiation U.S. innovators like you can bring to the table to position yourself for success.
Ensure regulatory compliance: Exporting products and technologies overseas requires adhering to complex regulatory compliance on both sides of the Atlantic, including U.S. export controls, ITAR, and strict EU rules. You will need to understand the rules of the road and put in place controls to ensure compliance.

While Europe is determined to build its own defense capacity, this is not a zero-sum game. To scale and advance its technological credentials, Europe must work with the very companies and innovators that are at the forefront of the industry. This presents an opportunity for U.S. firms to not only contribute to European security but also expand their market reach and solidify their position as global leaders in advancing technologies for national (and international) security.