Roving Periscope: Trump pushes Europe and China to hike defense budgets

Virendra Pandit

New Delhi: With US President Donald Trump’s rapid-fire actions emerging as the latest ‘threat’ to the existing world order, Europe and China are increasing their respective defense budgets to meet the potential exigencies in the next four years.

While the European Union (EU) has proposed borrowing of 150 billion euros (USD 157.76 billion) in a big rearmament push, compared to the US defense spend of USD 850 billion for 2025, China has also raised it to USD 249 billion—vis-à-vis India’s USD 82 billion

The European Commission proposed on Tuesday to borrow up to 150 billion euros (USD 157.76 billion) to lend to EU governments under a rearmament plan driven by Russia’s war in Ukraine and fears that Europe can no longer be sure of US protection, given some calls asking Washington to exit NATO.

The EU’s announcement came the day after President Trump paused all aid to Ukraine immediately, highlighting a growing divergence between European leaders and Washington over the continent’s security and how to handle Russia.

“We are living in the most momentous and dangerous of times,” European Commission President Ursula von der Leyen, who met Indian Prime Minister Narendra Modi in New Delhi last week to discuss bilateral free trade agreement, said. “We are in an era of rearmament. And Europe is ready to massively boost its defence spending.”

She proposed the 150 billion euros fund for priorities such as air defence, missiles and drones as part of an early package that she said could mobilise up to 800 billion euros for European defence.

EU leaders will discuss these proposals at a special summit devoted to defence and Ukraine on Thursday. Some of the plans will require the approval of EU governments, the media reported on Wednesday.

President Trump has accused European countries of failing to spend enough on their own defence and relying instead on the US for protection through the NATO alliance. European leaders insist they are now rapidly boosting defence spending.

Much of the EU’s proposed package focuses on encouraging the member states to spend more on defence and repurposing existing funds rather than providing new EU money.

It did not include a proposal for joint borrowing for grants – rather than loans – for defence projects, which countries such as the Baltic states and France have advocated but Germany and The Netherlands opposed.

The EU chief’s speech drew catcalls and interruptions from some Democratic lawmakers who held up signs and walked out mid-speech in protest.

Polish Defence Minister Wladyslaw Kosiniak-Kamysz said grants would be a better option. German Foreign Minister Annalena Baerbock hailed the package as an “important first step.”

Greek Prime Minister Kyriakos Mitsotakis also welcomed the proposals but added in a post on X: “We must now work out the details to ensure that all member states benefit – regardless of their current defense spending.”

As part of the plan, the European Investment Bank said it would lift limits on financing for defence projects and broaden the scope of what is eligible, though a ban on financing weapons and ammunition would remain.

As it has previously signalled, the EU also proposed that defence spending be exempt from limits imposed by EU rules on government debt.

“If Member States would increase their defence spending by 1.5 percent of GDP on average, this could create fiscal space of close to 650 billion euros over four years,” von der Leyen said.

European leaders are under huge pressure to increase defence spending as Donald Trump’s return to power has convinced many of them that they cannot be sure they can rely on US protection through NATO, as they did for decades.

EU members spent 326 billion euros on defence in 2024 – about 1.9 percent of GDP, according to the EU’s European Defence Agency. European leaders have declared spending should rise much further in the years ahead.

French Finance Minister Eric Lombard said on Tuesday that Paris “must go faster and harder” on defence spending.

The EU also proposed that the money countries receive from the EU’s ‘cohesion funds’ – designed to equalise living standards across Europe – could also be used for defence purposes.

Meanwhile, China has also announced a 7.2 percent increase in its defence budget for 2025, at 1.784665 trillion yuan (USD 249 billion), maintaining the same growth rate as the previous year.

The decision, unveiled in the government’s work report at the annual session of the National People’s Congress (NPC) on Wednesday, highlighted Beijing’s continued military modernisation despite economic headwinds. China has also set an economic growth target of 5 percent for 2025.

The defence budget for 2025, while lower than the double-digit annual increases seen in previous decades, remains the second-largest globally, following the United States.

The Chinese move came as Beijing continues to enhance its high-tech military capabilities, from stealth fighter jets and aircraft carriers to nuclear weapons. Rising tensions in the Taiwan Strait, the South China Sea, and with regional players such as Japan and the US have also driven the focus on military modernisation.

A key priority for the People’s Liberation Army (PLA), the armed wing of the ruling Communist Party of China, remains asserting control over Taiwan. Beijing considers the self-governing island democracy a ‘breakaway province’ and has intensified its military presence in the region.

Addressing the NPC, Premier Li Qiang reiterated Beijing’s preference for a peaceful resolution but warned against those advocating for Taiwan’s formal independence. “We resolutely oppose separatist activities and their foreign supporters,” he told nearly 3,000 lawmakers at the Great Hall of the People in Beijing.

On Wednesday, China also deployed a contingent of five aircraft and seven naval vessels near Taiwan, following a much larger military operation days earlier. These incursions are part of a broader strategy aimed at exhausting Taiwan’s defences.

In response, Taipei is also strengthening its military with upgraded US-made F-16 fighter jets, tanks, and advanced missile systems, alongside domestic defence developments.