In the face of Russian aggression, instability in the Middle East, and China’s military expansion, NATO countries may need to increase military spending from 2% to 4%.

Consequently, over the next decade, the United States and its allies may require around $10 trillion for rearmament, according to Bloomberg.

Despite global defence spending reaching a record $2.2 trillion last year, European Union countries have only just begun to contemplate the demands of 21st-century security, amidst an aggressive Russia on their eastern borders, the unstable Middle East, and the expansion of the Chinese military, which has drawn Washington’s attention to the Pacific region.

Political leaders have congratulated themselves on progress towards NATO’s goals of member nations allocating 2% of their GDP to defence. However, security officials suggest that to fulfill the alliance’s plans, military budgets may need to be increased to the 4% level.

If the United States and its allies within the “Big Seven” were to reach such a level, Bloomberg Economics estimates it would entail over $10 trillion in additional defence commitments over the next decade.

“The peace dividends” following the Cold War are coming to an end. This is likely to have a transformative impact on defense companies, state finances, and financial markets,” says BE’s chief geo-economics analyst, Jennifer Welsh.

The harsh reality for the US and its allies lies in the fact that Russia’s war in Ukraine means they must sharply bolster their defence in Eastern Europe concurrently with countering China, as the country strengthens its cooperation with Moscow.

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