US arms exports hit record in 2024 on Ukraine-related demand

US military equipment sales to foreign governments in 2024 surged 29 per cent to a record US$318.7 billion (S$429 billion), the State Department said on Friday (Jan 24), as countries sought to replenish stocks sent to Ukraine and prepare for major conflicts.

The figures from the Biden administration's final year underpin expectations of stronger sales for US weapons makers like Lockheed Martin, General Dynamics and Northrop Grumman, whose shares are forecast to climb amid rising global instability.

During his presidential campaign, Republican Donald Trump said allies should spend more on their own defences. Trump wants other members of Nato to spend five per cent of their gross domestic product on defence — a huge increase from the current two per cent goal and a level that no Nato country, including the United States, currently reaches.

Defence contractors are straining to meet the surge of demand that has mushroomed as a result of Russia's invasion of Ukraine. Global ministries of defence have been lining up to submit orders to boost their inventories, while the US is seeking to replenish stockpiles of weaponry and munitions sent to Kyiv.

Arms sales and transfers are viewed as "important US foreign policy tools with potential long-term implications for regional and global security," the State Department said in a statement.

Sales approved in 2024 included US$23 billion worth of F-16 jets and upgrades to Turkey, US$18.8 billion worth of F-15 fighter jets to Israel, and US$2.5 billion worth of M1A2 Abrams tanks to Romania.

Orders approved in 2024 often go into the order backlog for US weapons makers, which are expecting that orders for hundreds of thousands of artillery rounds, hundreds of Patriot missile interceptors, and a surge in orders for armored vehicles will underpin their results in coming quarters.

There are two major ways foreign governments purchase arms from US companies: direct commercial sales negotiated with a company, or foreign military sales in which a government typically contacts a Defence Department official at the US embassy in its capital. Both require US government approval.

Direct military sales by US companies rose to US$200.8 billion in fiscal 2024 from US$157.5 billion in fiscal 2023, while sales arranged through the US government rose to US$117.9 billion in 2024 from US$80.9 billion the prior year.

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