Arms Exports Under a Trump Presidency
During the run up to the 2016 US Presidential election, candidate Trump made frequent comments regarding exports and trade, most notably trade with China. Now that candidate Trump is now President-Elect Trump, what’s the outlook on exports in general and the export of arms from the United States?
Arms Sales Under President Obama:
According to the Stockholm International Peace Research Institute, US arms exports grew 54 percent from 2008 to 2015, the period under which President Obama held office. The 54% increase in arms exports represents the highest growth for any administration since the Truman and Eisenhower presidencies following World War II. In part, this boom was fueled by the Obama Administration’s policy of arming and training proxy groups in conflicts (most notably in Syria and Libya) and the drawdown of the conflicts in Iraq and Afghanistan, forcing domestic US-arms makers to look abroad for sales. During the same period, the US continued to dominate arms sales worldwide, increasing its share of sales from 28% to 36%. In comparison, Russia, the second worldwide largest seller accounted for 12% of arms sales worldwide.
In fiscal 2015, US arms sales to foreign governments exceeded $47 billion. Saudi Arabia, Australia, Iraq, Korea and Taiwan were the top five recipients of US weapons in the year ending September 2015. Clearly, the defense industry did well under President Obama.
Looking Forward: International
Although Candidate Trump frequently made contradictory statements related to foreign policy, he has repeatedly called on allies in Europe and Asia to pay more for their own defense. Defense experts say that could benefit the domestic industry as Trump is expected to keep supporting the supply of US arms exports to allies to help them build their defense capabilities.
US defense contractors can likely expect a continued boom in arms exports under President Trump. Persistent security risks in the Middle East and rising tensions in Asia and Europe will only fuel future arms sales worldwide.
Following the election results, shares of major defense contractors, including Raytheon Co., Northrop Grumman Corp. and General Dynamics have hit record high values, as investors bet on higher Pentagon spending.
There are two major ways foreign governments purchase arms from US companies. Direct commercial sales are negotiated between a government and a company. In contrast, foreign military sales are negotiated by the foreign government directly with the US Department of Defense. Both types of arm sales require approval by the US government, typically the US State Department.
Some major sales have been held up by members of Congress, most notably an arms export to the Philippines. In that case, comments by Philippine president Rodrigo Duterte in regards to human rights violations resulted in the cancellation of a contract for 26,000 rifles destined to the Philippine National Police.
Some members of Congress fear US arms could be used to fuel foreign conflicts, could quell popular unrest or could facilitate human rights violations. Congress has oversight over major weapons sales, including those that are completely or partly financed by the US government. It is highly unusual for sales to proceed if there are strong objections from lawmakers.
“Congress has never been a rubber stamp on arms transfers. We exercise close oversight and will continue to do so under the next president,” said Representative Eliot Engel, the ranking Democrat on the House Foreign Affairs Committee.
A Trump Administration will likely be open and willing to sell weapons to US allies and partners. Sales of US arms is a business friendly policy that plays to the US manufacturing base and fits into Trump’s plan to stimulate the domestic economy by boosting US manufacturing jobs. The world doesn’t seem to be getting more peaceful; the United States is likely to maintain its position as the world’s top arms exporter.
Looking Forward: Domestic
The future of domestic defense sales remains uncertain. US government spending in the defense industry fell, following the withdrawal of troops from Iraq and Afghanistan. Numbers of soldiers, sailors and Marines all decreased following the wind down in Iraq and Afghanistan. US Navy vessels and Air Force aircraft were mothballed and downsized. President-Elect Trump has indicated that he wants to increase the size of the Army and the Marine Corps, build new ships for the Navy, add aircraft to the Air Force’s arsenal and modernize the nuclear arsenal. Despite these claims, the cost and ability of the US government to pay for a larger military may thwart and prevent additional spending in the defense industry.
Trump has never detailed how he would increase manpower for the US military; one statement indicated the desire to seek 60,000 more Army troops, as many as 10,000 more Marines and dozens of new Navy ships and fighter jets. Independent cost estimates range from $150 billion to $900 billion in additional spending over 10 years. It would be easiest to focus on weapons systems already in development or production, rather than starting new weapon projects. This policy may (or may not) favor the F-35 Joint Strike Fighter, the Joint Light Tactical Vehicle and the Littoral Combat Ship as well as building new aircraft carriers. President-Elect Trump has come out against the costs of the F-35 Joint Strike Fighter, putting the future of the project (and other, similar expensive projects) in question.
Paying for a larger military could conservatively add an additional $55 billion in defense spending. Funding a larger military would be difficult and could result in raising the federal budget deficit, raising taxes or making large cuts in spending programs.