In the two years since Russia invaded Ukraine, the U.S. defense industry has experienced a boom in orders for weapons and munitions. Business is coming from European allies trying to build out their military capabilities as well as from the Pentagon, which is both buying new equipment from defense manufacturers and replenishing military stocks depleted by deliveries to Ukraine. Industrial production in the U.S. defense and space sector has increased 17.5% since Russia launched its full-scale invasion of Ukraine two years ago, according to Federal Reserve data.  Biden administration officials say that of the $60.7 billion earmarked for Ukraine in a $95 billion supplemental defense bill, 64% will actually flow back to the U.S. defense industrial base.  Recent spending by European governments on U.S. jet fighters and other military hardware represents “a generational-type investment. The past few years are equal to the prior 20 years,” said Myles Walton, a military industry analyst at Wolfe Research….Poland has placed orders worth about $30 billion for Apache helicopters, High Mobility Artillery Rocket Systems, or Himars, M1A1 Abrams tanks and other hardware, the department said. Germany spent $8.5 billion on Chinook helicopters and related equipment, while the Czech Republic bought $5.6 billion of F-35 jets and munitions.

The boost to the U.S. defense industry is just one way the fragmentation of the world economy along geopolitical lines is tightening U.S.-European relations, often to the benefit of the U.S. The U.S. became the world’s largest LNG exporter in 2023, and its LNG exports are expected to almost double by 2030 on already-approved projects. Around two-thirds of those exports go to Europe….

 The Ukraine war served as a warning for American defense strategists, said Cynthia Cook, a defense industry expert at the Center for Strategic and International Studies, a Washington-based think tank. “What Russia’s war pointed out relatively quickly is the constraints in the U.S. defense industrial base especially in terms of surging production rapidly. The good news is that this lesson has been learned when the U.S. is not directly at war.”

Excerpts from Tom Fairless, How War in Europe Boosts the U.S. Economy, WSJ, Feb. 20, 2024