Conclusion: Prospects for Continued Defense Spending Growth
The deteriorating global security environment and ongoing war in Ukraine have contributed to significant increases in defense spending across the world. The growth in NATO members’ budgets demonstrates the clear impact of the threat landscape on defense spending decisions. The dramatic growth in Russian military expenditures shows the costs required to maintain complex military operations at scale. However, as the case of the United States demonstrates, fiscal and political factors also determine defense funding.
Changes in the threat environment will shape global defense spending levels in the near future as states weigh how to allocate resources between defense and other spending and political priorities. While a resolution to the war in Ukraine has the potential to slow spending growth from European states and Russia, the cessation of combat operations alone will not guarantee a moderation of defense spending levels. European states, particularly those in the Baltics and Eastern Europe, must also perceive that the threat on their borders has significantly lessened, which seems unlikely should Russia continue to reconstitute and rebuild its military after the war.
Yet, questions remain as to whether Russia can sustain its current defense spending levels. The lower growth rate in its 2025 budget and potential decreases in real terms for 2026 and 2027 suggest a decline could be on the horizon.30 At an economic forum in June 2025, the Russian economy minister suggested that the country was headed toward a recession, with some commentators suggesting defense cuts could be on the line.31 However, other analysts suggest that Putin’s will to modernize and empower the country’s military will take priority over preventing an economic downturn.32
While a change in the threat landscape could shift European defense spending trends, economic trends could have an impact as well. European states also face fiscal challenges which could hinder their ability to meet the new NATO spending threshold and their willingness to allocate more resources to defense at the expense of other priorities.33 An economic downturn could force states to limit defense spending growth and allocate a greater percentage of funding toward non-defense priorities.
Barring a major change in the security environment that directly affects the United States or its allies or partners, political and fiscal realities will continue to have a major impact on U.S. defense spending levels in the near future.
Barring a major change in the security environment that directly affects the United States or its allies or partners, political and fiscal realities will continue to have a major impact on U.S. defense spending levels in the near future. Historically, the federal deficit has been a driver in the most recent downturns in U.S. defense spending in the late 1980s and early 2010s.34 Moreover, slim Republican majorities in both chambers of Congress necessitate Democratic support for passing additional increases in regular defense appropriations, which may be unlikely given the current partisan divide on spending. However, as the United States’ reaction to Russia’s 2022 invasion demonstrated—in which it rapidly distributed aid to Ukraine, increased its military posture in Europe, and passed supplemental funding to backfill equipment stocks—a sudden threat to the homeland, U.S. allies and partners, or U.S. interests could push the government to take immediate action.
Fiscal headwinds are less likely to slow China’s consistent and sustained spending growth as it continues its ambitious military modernization program. However, as the PLA develops, procures, and fields more exquisite and advanced weapons systems in its force structure, it will be forced to spend additional funds to operate and sustain those platforms. Absent continued increases in defense spending over time, operation and sustainment as well as personnel costs may consume a larger portion of China’s defense budget.
International defense spending levels have grown dramatically in light of increasing conflicts and the deteriorating global security environment. While economic and fiscal realities may challenge additional growth, further escalation of conflicts globally could nevertheless lead to even greater spending levels.
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Seamus P. Daniels is a fellow for Defense Budget Analysis in the Defense and Security Department at the Center for Strategic and International Studies in Washington, D.C.
