Global Defense Spending Hits Record $2.89 Trillion as Europe and Asia Rearm

Global military spending climbed for the 11th consecutive year, reaching a record $2.89 trillion in 2025. According to data from the Stockholm International Peace Research Institute (SIPRI), global defense outlays as a percentage of GDP rose to 2.5%, the highest level seen since 2009, fueled by persistent geopolitical upheaval and large-scale armament drives. Europe emerged as the primary driver of this increase, with regional spending rising 14% to $864 billion. Germany, excluding Russia, was the region's largest spender, with expenditures jumping 24% to $114 billion, pushing its defense burden to 2.3% of GDP. Spain also saw a significant jump, with spending increasing 50% to $40.2 billion, surpassing the 2% GDP threshold for the first time since 1994. In contrast, U.S. military expenditure declined by 7.5% to $954 billion, a drop attributed to the lack of new financial assistance for Ukraine during the year. However, this decline appears temporary, as the Pentagon has requested a record $1.5 trillion for fiscal 2027. Spending in Asia and Oceania rose 8.1% to $681 billion, the largest annual increase since 2009. Japan's expenditure reached $62.2 billion, while Taiwan's spending grew 14% to $18.2 billion amid intensifying military activity from China. China's official spending rose 7.4% to an estimated $336 billion, though analysts suggest actual figures may be higher due to disclosure gaps. This global spending boom has provided a significant tailwind for defense contractors. South Korea's Hanwha Aerospace saw its shares surge 193% in 2025, driven by the export of its K9 self-propelled howitzer, while other firms such as Hyundai Rotem have also benefited from the increased demand for armored systems.