Global military expenditure reached a record high of $2.89tn in 2025, marking the 11th consecutive year of consecutive growth. According to the Stockholm International Peace Research Institute (SIPRI), the figure rose by 2.9% in real terms from the previous year, pushing the global military weight to 2.5% of worldwide gross domestic product.
A deceleration in the US military spending slowed the overall global rate of growth compared to 2024’s massive 9.7% spike. But with geopolitical upheaval, ongoing wars, and strategic rearmament driving the growth, spending outside of the US surged aggressively by 9.2%.
A measure of the simultaneous stimulus to global economic activity and inflation, alongside pressure on public purses and rising borrowing rates, is the eye-popping scale of planned defence spending over the coming decade, according to Mike Dolan, a Reuters columnist.
Former US Navy Admiral James Stavridis, now managing director and partner at The Carlyle Group, has estimated that additional defence commitments from G7 governments over the next 10 years amount to some $8tn of additional rearmament spending on top of prior trends.
With the collective annual GDP now just over $55tn for the US, Japan, Germany, France, Britain, Italy and Canada, an $8tn increase over a decade amounts to almost 15% of 2026 GDP.
Stavridis points out that G7 defence spending has risen to 2% of GDP, its highest share in over 30 years, with that share projected to rise to 3.8% as soon as 2030. Across Europe alone, broader defence goals imply roughly €4tn to €5tn ($4.5tn-$5.7tn) of additional spending over the coming decade — rising toward €9tn “when adjacent infrastructure is included.”
The earmarked increase in US defence outlays in the 2027 fiscal year to a record $1.5tn would surpass the World War II peak in inflation-adjusted dollars. According to the Center for Strategic and International Studies estimates, that level of defence spending by then would amount to some 4.6% of US GDP — just shy of 2009’s peaks and approaching levels last seen at the height of the Cold War in the 1980s.
Aside from the eye-catching totals, the main point Stavridis makes is that this spending is likely to be very different in terms of procurement than in the past — far less on warships and tanks and more on tech, drones, cybersecurity and battlefield AI. All of which will be cold comfort for restive government bond markets having to absorb the additional borrowing that goes with these increases.
The defence-to-debt-servicing ratio has historically been cited as a warning metric signalling debt sustainability concerns. The Washington-based Institute of International Finance recently estimated that average government borrowing costs across the G7 are now at their highest since mid-2008, while annual interest expenses are nearly 85% higher.
Over the past year, advanced economies paid over $3.3tn in interest on internationally traded government bonds alone — more than the estimated $2.6tn of global spending on AI, $3.1tn on defence or $2.3tn on clean energy. Here’s the other side of the picture.
If current trends continue, global defence spending could hit $6.6tn by 2035, according to SIPRI.
Global defence spending vastly outpaces funding for development, creating a stark trade-off that directly stalls progress on human development targets. According to reports from the United Nations Development Programme (UNDP) and the SIPRI, soaring military budgets actively divert critical resources away from education, healthcare, and poverty alleviation.
Alongside dizzying outlays for AI, the spending splurge on defence leaves little doubt that the world’s major economies are now entering a high-octane and high-stakes balancing act.