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Global M&A deals slow down in the third quarter due to rising borrowing costs
M&A activity totaled $993 billion in the past three months, a 41% drop compared to second quarter 2026. This is the first quarter that has fallen below $1 trillion, since the second half of 2025. The ten megadeals worth more than $10 billion announced during the third quarter included Gold Fields' $25.7 billion bid to acquire Northern Star Resources and Banca Monte dei Paschi’s $32 billion offer for Banco BPM. This was the lowest quarterly number since the fourth quarter 2024. The surge in energy costs has fueled inflation and raised expectations about interest rates. The benchmark 10-year US Treasury Yield hit 5.34% Thursday, its highest since 2002 after posting the largest quarterly increase this century in three months up to September. John Collins, Morgan Stanley's global head of M&A, said that "at the margins (higher yields) makes valuations sometimes harder." "It's hard to quantify the impact, but I am not yet ready to declare a slowdown." The number of transactions fell by 8%, to levels not seen since the year 2020. Carsten Woehrn is Goldman Sachs’ co-head for M&A in Europe Middle East and Africa. If the current pace is maintained, he believes that the total value of the deals will surpass the peak in 2021. Woehrn stated that "Megadeals continue and we have seen significant activity in the past few months." Boards are feeling more pressure to close strategic deals. The?technology industry has seen unprecedented levels of investment, and strategic stake purchases of these companies have accounted for approximately one quarter of all global M&A deals so far in this year. Earlier this summer, Anthropic - the maker of Claude - and ChatGPT - the maker of OpenAI gathered tens billions of 'US dollars in investment. While US and European M&A fell dramatically in the last quarter, Asia Pacific M&A reached $242 billion. This is up 8% compared to the second quarter, and 36% compared to the same period last. The third quarter of this year saw a decline compared to the same period in the previous year. The cross-border business continues to be a major theme in this year, with a 32% increase compared to the same period of last year. We're seeing US companies considering acquisitions in Europe, for the first-time. They are taking advantage of the strong dollar. People are investing in the U.S. to take advantage of higher growth opportunities in the country, said Charlie Bouckaert. DEALMAKING AND TRILLION DOLLARS IPOs The new listings, especially in the tech sector, has given companies the currency they need to acquire rivals. SpaceX bought AI coding startup Cursor days after its blockbuster Nasdaq debut. The company's valuation soared to over $2 trillion. Collins stated that "one of the driving forces behind activity is that larger companies may be able to navigate the transition to?AI more effectively." SpaceX's June IPO helped to drive $215 billion in global initial public offerings (excluding SPACs) in the past year, the highest amount since 2021. This was despite a smaller number of deals compared to the same period in 2017. In the past three months,'stock sales' raised US$284 Billion, which is 26% less than proceeds raised in equity capital markets for the second quarter. However, this represents a 39% rise from the third?quarter 2025 thanks to offerings by SK Hynix, and Intel. Bankers warned that investors might be hesitant to invest in certain technology and AI deals. Andreas Bernstorff is the global head of equity markets at BNPParibas. Some IPOs were delayed in recent weeks as higher interest rates, and setbacks within the data center eco-system threaten to derail a slew new issues. Bankers are confident despite the uncertain future. Bouckaert stated that "strong secular trends, such as AI, are driving activity and we expect to see 2027 be another prosperous year."
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Officials claim that Israeli settlers killed Palestinians in West Bank
Palestinian officials reported that Israeli militant settlers killed one Palestinian and injured the other in an attack on Yasuf village in the Israeli-occupied West Bank, on Thursday. According to the UN, Israel's military, including settlers, has killed over 80 Palestinians since the start of 2026 in the West Bank. Jumaa Abdul Fattah, head of the village council, said that settlers killed Mashour Yassin during an attack against his home, which was located on the outskirts Yasuf. Fattah claimed that the?assailants' came from a settlement outpost near the village, which was built about two months ago. He added, "The settlers have attacked the village continuously ever since the outpost's establishment." Israeli soldiers claimed that Palestinians threw stones at "Israelis approaching the village" and the military dispersed the villagers. The Israeli military also fired at the Palestinians. The report did not explain why Israeli settlers had encroached on the village. Fattah claimed that the settlers shot two Palestinians before Israeli soldiers arrived. The Israeli military didn't immediately comment on timing. The rights groups claim that the growing presence of settler on the outskirts of villages is part of a?campaign to seize land and to eat away at the?territory in which Palestinians?aim to create a state. Israel captured the West Bank of Palestine in 1967. Since then, the territory is under Israeli military occupation. The settlers are encouraged by the government of Benjamin Netanyahu who has overseen the massive expansion of Jewish settlements. Most countries and the UN consider Israeli settlements illegal under international law that governs military occupations. Israel disputes that interpretation, claiming the status of the territory is in dispute.
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VAROPreem CEO: Europe's defense spending supports the shrinking refining industry
The CEO of Europe's largest refiner said that the sector's shrinking size is a result of the rising demand for fuel to support government defense plans. Data from the European Council show that in 2025, European Union member states' defense spending increased?for?the?11th consecutive year to EUR418.9 billion ($472 Billion), marking a 75 percent increase since 2021. Further gains are expected for this year. "Every conversation that I have with European governments is about resilience and continuity of supply. Dev Sanyal, CEO of VAROPreem, said on Thursday that the focus between 2015 and 2020 was to'shut down refineries. "European governments are aware that more fuel is needed. He added that there was a (also) need for more fuel because Europe wanted to gain a competitive edge in AI. FuelsEurope, an industry group, said that since 2009, 30 out of 100 European refineries have closed or been 'converted', and at least seven have been converted into biorefineries. This has severely reduced the production capacity for diesel, gasoline, or jet fuels in the European Union (EU), Britain, Norway, and Switzerland. "Now that defence spending is increasing, you realize that F-35s, Leopard tanks or US-made fighter planes don't run off biogas," said CEO of the Swiss-based VAROPreem. The company has refineries in Sweden and Germany, as well as refineries located in Switzerland, Germany, and Switzerland. According to the most recent Statistical Review of World Energy published by the Energy Institute, the refining capacity of EU countries, Britain and Turkey, as well as the Ukraine, Switzerland, and the Ukraine stood at 14,4 million bpd. This is down from the 17.5 mbpd of '2009. The price of diesel has risen dramatically since the Iran war cut off vital shipping routes and after sustained attacks on Russian refinery infrastructure. The benchmark European Diesel Futures Contract has reached highs of over $1,500 per metric ton, last seen after the Russian invasion of Ukraine 2022. Sources said that US retail diesel prices have hit a record of $6.50 a gallon in the last month. The US is increasing pressure on Europe to reduce diesel stocks.
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Asia's gas margins skyrocket on outages and China export ban, traders claim
The 'gasoline margin in Asia reached a new record on Thursday, as a result of various refinery outages and reports that Chinese refiners had halted fuel imports for the month of October. The crack or refining profit. Brent crude oil rose by $50.53 to $50.53 for gasoline. Four people who were briefed in the matter confirmed that Chinese refiners had suspended oil exports to October. Beijing is looking to preserve its domestic stock, and this move will further depress fuel markets already under pressure due to war. Brent futures were rolled over to next month's contract on Tuesday, resulting in a drop in the crude oil price. This would have?contributed to the crack widening. News of China's?reduction in product exports also supported the tightening of the Asian market," Alan Gelder said, senior vice-president, refining chemicals and oil markets, at Wood Mackenzie. The price of benchmark fuel has risen to $150.69 a barrel, its highest level since March this year. A Singapore-based gasoline dealer said, "Inventories have been low and there are refinery problems too. This is pushing prices up." The state-run Mangalore Refinery and Petrochemicals Ltd. (MRPL) in India cancelled Wednesday three spot tenders for refined gasoline after a fire broke at a processing facility. The refiner told the exchanges that the export tender would be refloated shortly after an evaluation of the situation. Market sources reported that a major South Korean refiner shut down its gasoline production unit as well due to "some issues". Singapore, China, India and South Korea are the top gasoline exporters of Asia. Enterprise Singapore data showed that Singapore's stocks of light distillates, including naphtha, gasoline and other fuels, had fallen to a 5-year low, falling to 10.514 billion barrels during the week ending September 30. This was largely due to an increase in exports of transport fuels. The period saw a total of 187,000 metric tonnes (approximately 1.5 million barrels) in gasoline imports, while exports rose to approximately?672,000. Australia led the way with 189,000 tons of gasoline exported, followed by Indonesia with 160,000 tons. China led the way with nearly 78,000 tonnes of gasoline inflows, followed by South Korea with about 46,000.
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Construction spending in the US surges in August
US construction spending surged unexpectedly in August, driven by non-residential buildings like offices and power plants. However, the trend was weak as higher mortgage rates weighed down on homebuilding. Census Bureau of the 'Commerce Department' reported on Thursday that construction expenditures jumped by 0.9% following a downwardly revised 0.1% drop in July. Economists surveyed by predicted construction spending would remain unchanged in August following a previously reported 0.5% decline in July. In August, construction spending fell 1.7% year-over-year. After falling by 0.2% in July, spending on private construction projects jumped 1.1% in august. Private non-residential investment increased by 1.0% in August. Spending on power plants increased by 0.9%, while expenditures on office projects rose by 4.6%. In August, investment in residential projects grew by 1.1%. This is likely due to renovations. The expenditures on single-family projects increased by 0.2% but fell 3.5% year-over-year. Since the US-Israeli War with Iran began in late February, the average rate for a 30-year fixed mortgage has increased by more than 100 basis points. This has affected demand and left an overhang of unsold homes on the market. Data from mortgage finance company Freddie 'Mac revealed that it?averaged 7.3%?last week. This is the highest level seen since January 2025. The spending on multi-family units, which make up a tiny part of the housing market in August, grew by 0.2%. Investment in public construction projects increased?0.2%, after increasing by 0.1%?in July. Construction spending by state and local governments increased 0.3% while federal government expenditures declined 0.7%.
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EU governments spent EUR18 Billion in 2026 to cushion the energy price rise
The European Commission stated in a report that the EU 'governments spent EUR17.9billion this year to 'cushion the effect of higher oil and gas prices on households and businesses. In a document to guide the discussions of euro-zone finance ministers during a meeting on October 8, the Commission also encouraged governments to "invest in electricity grids" and to tax it less than gas to encourage them to move away from fossil fuels. The Commission stated that the euro zone's economic growth is expected to be slightly higher this year than the 0.9% growth forecast in May. However, next year, it will likely be lower than the 1.2% growth forecast last year. The Commission said that inflation is expected to be roughly in line with the forecasts of 3.0% for this year, and higher than 2.3% in 2027. The note from the Commission stated that "the borrowing costs of Member States have increased substantially, underscoring the need for fiscal caution." It said that "in this context, since onset of the Middle East Conflict 25 Member States have implemented fiscal policy measures in order to mitigate the impact of high energy costs on households or businesses, at a cost of EUR17,9 billion (0.1% GDP of EU-27) by 2026." "More that?two thirds of the funding is for untargeted prices measures, which are not in line with the need to?target short-term actions to the most vulnerable and minimise fiscal costs as well as be consistent with the 'need to decarbonise energy system. The yields of euro zone government bonds are near multi-year highs, and the escalating energy crisis continues to support bets that at least three European Central Bank rate increases will occur by late 2027. The Commission stated that if governments wanted to help consumers and businesses they should do it through well-designed short-term, targeted, and temporary measures. This is a lesson learned from the energy crisis of 2022-2023.
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Copper prices are on the rise, thanks to China's growing factory activity
Copper prices rose on Wednesday, as data revealed that Chinese factory activity had returned to growth. However, trading was subdued due to a holiday week for 'the top metals consumer. The benchmark three-month copper price on 'the?London Metal Exchange' rose by 0.23% at $14,471 per metric ton as of 0330 GMT. Meanwhile, the most traded November copper contract in Shanghai Futures Exchange gained by 0.21%, to 109,530 Yuan ($16340.20) per ton. This is expected to finish a week that will be shortened due to the upcoming long holiday, 0.52% down. China's official purchasing managers' index increased to 50.1 in September from 49.8 a month earlier. A RatingDog private survey revealed that factory activity?expanded faster than expected: its PMI measurement rose to a 5-month high of 52.1, from 51.5. The trading was relatively quiet before China's National Day. SHFE will be closed from Thursday and reopen October 8. The physical copper demand has also been reduced heading into the holiday break. The domestic premium The price of a ton of copper continued to fall from its peak on Tuesday, to 1,050 Yuan. The Yangshan copper price premium is still high The price of imported materials in China, which is a measure of the appetite for these materials by Chinese consumers, has risen?slightly' to $119 per ton. The US dollar was stable, headed for a 2% rise in the next month, supported by higher US yields. The stronger the dollar, the more expensive metals are for holders of other currencies. Brent crude also remained steady, hovering at $100 per barrel. This kept inflation fears and expectations of another rate increase by the US Federal Reserve alive. Nickel gained 0.23%. Lead was flat. Aluminium fell 0.35% on the SHFE. Zinc dropped 0.26%. Lead declined 0.12%. Nickel dropped 1.00%. Tin was flat.
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US Trade chief considers trade deal tariff caps for excess capacity probe
US Trade Representative Jamieson Greer stated on Tuesday that the Trump administration would take into account tariff caps negotiated in trade agreements with countries when weighing potential 'new duties' as part of an investigation on excessive industrial capacity. Greer told reporters that he didn't want to make any assumptions about the results of a Section 301 investigation, which is expected to be focused on excess capacity within?China and key trading partners. Greer said: "I'm not going to speak before the report and proposed actions, but let me say that we value these deals.?And we will definitely take them into consideration when we look at any outcome of this report." Greer told a group of CEOs and Trade Ministers that many of these deals actually go a long ways to mitigate the effects of any excess capacity in those countries. The Trump administration used its G20 presidency this year to bring attention to China’s excessive production capacity and overreliance on exports as a growth driver. All G20 countries, except China, agreed to take?actions in response to such policies at the G20 Finance Ministers Meeting held in Asheville (North Carolina) at the start of September. Maros Sefcovic, the European Union's trade chief, told CEO roundtable participants on Tuesday that he was pleased with the Trump administration's emphasis on combating excess industrial capacities at the G20 summit. Sefcovic said that the EU is pushing for reforms in excess capacity within the G20 framework as well as at the World Trade Organization. Sefcovic also stated that the EU is working to strengthen cooperation with the US and other allied countries on key minerals in order to secure supply chain and avoid the "weaponization". Production of these materials, which are currently dominated mainly by China, has been a priority for the EU.
Special Report- Trump's pressure against NATO is changing Europe's defences. Will it end the alliance?
Mihail Kogalniceanu Airport in Romania was designed to make Americans feel comfortable. The streets of the base are named Alabama (the state), Ohio (the state), Alaska (the territory) and George Washington. Since 1999, the base has been home to U.S. soldiers who have supported America's wars against Iraq and Afghanistan.
About half of the roughly 2,000 American soldiers in Romania last year, the majority of whom lived at the base, left as the Trump administration began to realign the U.S. Military presence in Europe. The departures in Romania, a North Atlantic Treaty Organization bordering Ukraine country, caused alarm. MK, as it is called, sits at the eastern flank of the alliance, during a period when Russian drones are repeatedly crossing into NATO territory.
When I visited MK back in July, it told a much more complex story about President Donald Trump’s efforts to remake NATO. Nine U.S. KC-135 Stratotankers parked at the base, which were deployed to refuel American bombers and jets during the Iran War. The crews and support staff of the KC-135 Stratotankers had offset earlier troop departures. This was a reminder to Washington that it still heavily relies on European bases. The Stratotankers remained in place for more than two months.
This paradox is at the heart of Trump's conflict with the 32-nation coalition. He has threatened to cut troops, badgered allies about defense spending, and criticized European governments for not supporting the U.S. - Israeli war against Iran unconditionally. A?examination on U.S. military activities in Europe revealed that the Trump administration is continuing to invest in NATO facilities, and relying upon them to project its power throughout Europe, the Middle East and even beyond.
In order to assess the impact of Trump's campaign against NATO, we interviewed over 50 Western officials and experts in defense, including former ambassadors from the United States, senior Trump administration officials and congressional aides. Journalists also visited NATO bases in Romania and Estonia and watched NATO military exercises near the coast of North Carolina.
Reporting revealed a relationship under strain, but not yet broken. Nine former and current U.S. government officials said that powerful U.S. defence contractors with large European customers and Congressmen Republicans and Democrats have the political power to stop a U.S. withdraw from NATO, something Trump has threatened to do repeatedly.
Trump's attacks have damaged the 77-year old alliance in ways that both European and American analysts say are hard to reverse. Europe is questioning America as a partner in security, according to a new study. These doubts now influence defense spending, weapon procurement, and long-term planning on the continent.
Many interviewed spoke of a decline in transatlantic confidence that has undermined NATO's main deterrent, Article 5, which states that "an armed attack against one member is treated as an attack against all." An unreliable U.S. leading a failing NATO could be disastrous for Europe's safety, as it faces an aggressive and openly expanding Russia on its eastern border.
The study found that despite the increase in military spending across NATO, eight countries, including Canada, Poland and Denmark, are diversifying away from their dependence on U.S. technology, weapons and defense companies. Trump's attempt to get Europe to increase its defense spending could backfire if it causes some of his allies to become less dependent on U.S. military contractors and technology.
"The pressure was effective, but it caused real uncertainty," said J.C. Lintzenich. He is a former senior U.S. military official in the intelligence community who left government service in February, after advising top Pentagon officials and policymakers at Congress. "Europe is spending a lot more money, is taking its defense more seriously and is accepting more responsibility. That is a great success." There is a genuine fear in Europe that America could abandon them.
Olivia Wales, White House spokesperson said that President Trump had done more than anyone for NATO. "He will unapologetically promote America's interest." Trump's claim to credit for increased European defense spending is a lie. It has been fuelled by Russia's full scale invasion of Ukraine 2022 that has destroyed cities, killed thousands and forced millions of Europeans to flee.
Matthew Whitaker told reporters that "a strong alliance is one where allies hold each other accountable." NATO released a statement pointing to remarks made by Secretary General Mark Rutte who praised Trump's efforts in driving up defense spending throughout the alliance.
Trump's ability, however, to remake NATO is hampered by significant limitations. According to two U.S. government officials, U.S. Secretary of Defense Pete Hegseth planned to announce the reduction of 25,000 U.S. soldiers in Europe before leaving for a NATO Ministerial Meeting in Brussels, in June. According to two U.S. officials, the proposed cuts would have brought American forces in Europe under the 76,000-troop mandated by Congress and signed into law last summer.
Hegseth, instead, faced resistance from Trump's administration and delivered a warning to NATO's curved glass-and-steel headquarters in Brussels. The Pentagon will conduct a six month review of America's forces in Europe. It will pay particular attention to countries that refuse or say they are unsure or waiting and seeing when Washington asks for support. Hegseth stated that the review would be thorough. "Some countries are going to fail."
According to a copy reviewed by, the Pentagon has kept quiet about the review. However, in August, it created a document that included 57 questions aimed at assessing allies' military, financial, and ideological commitments to the U.S. One question asks, for example, if a country "publicly supported U.S. Foreign Policy Priorities."
The review revealed a Washington struggle over how far to reduce the U.S.'s role in Europe, without compromising its own military power. Five senior congressional aides, both Republicans and Democrats, said there was a growing bipartisan mistrust of Hegseth’s handling of NATO. One of the aides stated that Republican and Democratic Senators were concerned the Pentagon would announce "a decision which might not be beneficial for NATO or U.S. National Security."
Three people with knowledge of the situation said that Hegseth may propose the same reduction as he had announced in June, i.e. 25,000.
The Pentagon and Hegseth did not respond to written comments. A senior Pentagon official said: "This serious review is designed to be rigorous and consultative."
According to audits by the government and testimony from Congress, there are more than 81,000 U.S. military personnel stationed in Europe. This number fluctuates as troops rotate across Europe on exercises and deployments.
In 2017, four years before Trump took office, the U.S. had an average of 65,000 troops in Europe. This number grew to 74,000 troops during Trump's first term and then to 105,000 under Joe Biden following Russia's invasion of Ukraine. By the time Trump was re-elected in 2025, this number had dropped to current levels.
Trump's battle with NATO is part and parcel of his broader effort to overturn the international order that the U.S. built after World War Two. His administration is challenging institutions, norms, and alliances that have been in place for decades with an "America First" transactional approach that puts the U.S.'s dominance above treaties and multilateral collaboration. Trump's attack on the global justice system was detailed in previous reporting, which included crippling U.S. Sanctions against the International Criminal Court as well as his scrambling American diplomacy through hollowing out U.S. Embassies and threats to both friends and enemies.
TROOPS & TRUST
The majority of allies agreed to Trump's demand for increased defense spending. This turned the potentially explosive NATO summit at Ankara in July into a meeting that Trump described as "very successful".
The Pentagon's six month review is the main uncertainty that hangs over the alliance. Some European officials think that NATO's military leadership could manage a U.S. withdrawal without exposing Europe's vulnerabilities. Some fear that the process will lead to a race for Washington's favour. Officials in Romania and Poland have said they have been lobbying discreetly, but intensely, to keep American soldiers on their territories.
Why do these countries want American soldiers on their soil? George Scutaru is a Romanian expert in defense and the head of New Strategy Center (a Bucharest-based think tank). "Because a human shield is the best deterrent."
The Iran War shows how Washington is still dependent on European geography even when its relations with its allies are strained.
Reports state that Italy denied permission to some U.S. aircraft in late March to land in Sigonella, Sicily, before they headed to the Middle East. By late June, however, over 500 U.S. aircraft had passed through Italian bases. This included 343 aircraft transiting through Sigonella, and 211 aircraft passing through Aviano, in the north of Italy. Many of these aircraft were carrying munitions.
Trump still attacked Italian Prime Minister Giorgia Melons in a post on June 20, saying that "she would not even let us use Italy’s landing strips or airports, which is a great logistics inconvenience." The Italian Government did not respond to an?ask for comment.
Since 1949, NATO is a cornerstone in American power. It helps the U.S. station forces throughout Europe, deter enemies, project military force, and anchor a block of democratic allies. In exchange, Europe received the protection of one of the most powerful militaries in the world, which helped sustain a period of peace and prosperity that was unprecedented in modern history.
This bargain has enjoyed wide support in Washington, irrespective of party affiliation. Trump is not one of them. In his four decades in public life, Trump's position that other countries should not be protected by the United States has been remarkably consistent.
In a 1987 CNN interview, he stated that "Many people are tired of other countries ripping the United States off." Trump stated during his presidential campaign in 2016 that allies must pay up, or else "get out". "And if that breaks up NATO, then it breaks NATO." Trump, in his first term as president, demanded that allies raise defense spending from 2% to 4%. He pushed for the 5% just before returning to his office in 2025.
He told reporters that if they didn't pay he wouldn't defend them.
NATO reports that European allies, including Canada, will spend 2.3% of their GDP combined on defense by 2025. Except for Spain, all of them have committed to spending 5% on security and defense-related investments in 2035.
Kay Bailey Hutchison is a former Republican U.S. Senator who served as Trump’s ambassador to NATO during his first term. She said Trump appears to believe the U.S. benefits more from his relationships with rival powers like Russia and China rather than through alliances, such as NATO. She said, "I have always wanted the President to understand that we need allies if China is our long-term enemy."
Trump, despite his attacks on NATO and the European military establishments that he has funded during his second term, has continued to fund major infrastructure projects. Washington has not backed down from the Naval Station Rota and Moron Air Base in Spain, which Trump called "a terrible NATO partner" at the Ankara Summit.
The U.S. announced in May and June that they would be re-enforcing aircraft facilities at Moron and awarding $400 million worth of construction contracts to Spanish firms to improve and maintain the base for the next decade.
Rota and Moron can be difficult to replace. They provide access to the Atlantic, Mediterranean and North Africa and extend U.S. Military power into the Middle East. The Spanish Prime Minister Pedro Sanchez stated at a press conference during the Ankara Summit that the U.S. had made a "sovereign" decision to deploy American forces in Europe and that Spain has "excellent" military relations with the U.S.
The U.S. invested over $100 million into the expansion of Mihail Kogalniceanu Air Base in Romania. This was done alongside a $2.7 billion Romanian-funded project that will make Mihail Kogalniceanu Air Base the largest NATO base in Europe by 2040, with a capacity for up 20,000 personnel.
Trump criticised then-Prime Minster Keir starmer in March for Britain's lack of support for U.S. attacks on Iran. According to a presentation made in March by a U.S. Air Force group that manages the base infrastructure, the U.S. spends more than $4.2billion on current and upcoming project at seven British air bases. U.S. Bombers have carried out missions against Iranian targets at least from one of these British bases. This reinforces the strategic importance Europe has for U.S. military activities well beyond Europe.
At least a dozen former and current officials from Europe and the U.S., as well as Canada, cautioned Trump that he doesn't have to withdraw formally from NATO in order to cripple the alliance. The anti-NATO rhetoric of Trump alone could signal to Russian President Vladimir Putin that the West was divided and more vulnerable than appeared.
These officials fear that Putin is testing this assumption by a series of sabotage events across Europe, which European nations blame on Russia. In August, there was a drone attack on an airport in Germany and a fire in a Polish drone manufacturing factory.
NATO sent Romanian fighters to intercept a Russian drone which had infiltrated Romanian territory. This was just two days after NATO's visit to Romania's MK Air Base. A Romanian F-16 flying from another base shot it down. In the days that followed, two more drones believed to also be Russian were shot down. A Russian cruise missile then landed in Poland in late July. Poland is another NATO frontline ally.
Denis Gonchar denied that Russia was involved in the incidents which occurred in Germany, Poland, and Romania. He called the provocations "dirty" and attributed them to Ukraine and others who were trying to "drag NATO, the European Union, and Russia into a direct confrontation."
European officials blame Moscow for the increasing brazenness of these incursions, and claim that they are part a campaign to undermine support for Ukraine, and test NATO unity. Marius Lazurca is the national security adviser to Romanian president Nicusor Dan. He said that a drone shot over Romania by a Spanish pilot in a U.S. fighter jet demonstrated NATO solidarity.
Scutaru is a Romanian expert in defense. He said, "It's clear that Russia tests Romania's defence capabilities and NATO response."
What Washington expects from its allies is less clear for many.
Poland and Germany increased their defense spending, but still face the possibility of U.S. troop reductions. Denmark spends a higher share of its GDP on defense than does the U.S., but Trump continues to threaten Greenland. The Federal Foreign Office of Germany said that the U.S. will continue to play an "important role" in Europe's defense as Europe becomes more responsible. The Danish Defense Ministry did not respond to a comment request.
Pentagon officials are exploring ways to punish allies Trump views as being disloyal. U.S. officials revealed in an internal email that was previously published by the U.S. Elbridge Colby, the Under Secretary for Defense Policy, discussed with Spanish officials the possibility of suspending them from NATO if they refused to support Iran strikes. This was despite NATO having no way to suspend members. Allies were braced for a confrontation at the Ankara Summit, only to hear Trump switch from attacking Spain to praising "the tremendous love" that he felt towards NATO.
Look Beyond Canada and Europe
NATO governments do not wait for Washington to provide clarity. Rearmament is taking place at a rate not seen in decades, and in some cases they are looking for alternatives to American technology.
Trump's threats against NATO and Russia's war on Ukraine have been the driving forces behind the increase in European defense expenditure. NATO reported that its European members, Canada and the United States increased their combined defense expenditure by 20% between 2025 and 2015.
Trump said that U.S. Defense contractors would enjoy a windfall. He said, "We'll manufacture it and they're paying for it," at a White House meeting with NATO chief Mark Rutte. "We're going to make a lot of money." Trump said at a White House meeting with NATO chief Mark Rutte in July 2025.
At least eight NATO members, including Canada, Poland and Denmark, as well as Spain, Norway and Turkey, are looking for ways to reduce their reliance on U.S. technology, weapons and defense companies, as concerns grow over the durability of U.S. assistance.
Wendy Gilmour said that such doubts were not surprising. She was a former NATO assistant secretary general in charge of defense investment. She said that many people thought Trump's election was a "fluke" and assumed the U.S. remained a reliable ally. "The second vote feels deliberate and it feels like America is not the exceptional democracy we thought it was.
As they look to reduce their decades-long reliance on U.S. defence firms, Canada and Poland, among others, are purchasing more equipment from non-U.S. companies, including radar systems and jets.
This has caused concern at the Pentagon. Colby, Pentagon's top adviser on policy, wrote in a social media post from July that allies should work with the U.S. Defense Industrial Base "rather than try to replicate or replace it."
Canada, embroiled in an ongoing trade war with Trump offers a glimpse at the tensions that are emerging within the alliance. Three senior Canadian government officials who recently left their posts said they received mixed messages about Canada's attempts to diversify its defense procurement from the Pentagon. Canada selected an Australian Arctic radar system worth $1.7 billion over its U.S. rival in June. Former senior Canadian officials directly involved in the decision stated that the Pentagon supported the selection because the Australian company promised to deliver the Arctic radar system years sooner than its U.S. competitor.
Pentagon officials expressed concerns about Canada's decision to purchase early-warning Radar planes from Sweden rather than the U.S. and to consider buying some Swedish-made Gripen jet fighters instead of additional U.S.-made F-35s. One Pentagon official questioned whether Canada is a "credible" partner in the mutual defence of North America.
Canada's Defense Ministry said in a statement that it has not yet decided if it will buy additional F-35s beyond the first batch expected to arrive this summer, or if they'll pursue alternatives. The ministry stated that the review of the F-35 continues as it works to maximize the economic benefits for Canadian workers and businesses.
Gijs Tuinman was the Dutch Minister of Arms Procurement and Personnel until February. He said that efforts to end dependence on U.S. arms could have significant consequences. He said that he thought anti-Trump sentiment could push some governments in Europe to reconsider their participation in major American defence programs. Experts say this could cost U.S. firms billions.
The risk is enormous. Tuinman told an interview that it was on the verge of happening.
Lockheed Martin, the company that makes the F-35 fighter jet, said it was seeing "strong demand" from NATO member countries for its fighter plane and other products. According to a Pentagon document, Poland and Finland are expected to receive their first F-35s in this year. Canada and Germany will follow.
Gonchar said that the Russian threat is being exaggerated in order to encourage Europeans continue to buy expensive American military gear.
It will take time to untangle Europe from the decades-long military integration with the United States. It takes years to develop manufacturing capacity. The development of most new weapons takes even longer. Many European, American, and Canadian officials said they view the dependence on U.S. supply chains, technology, and political leadership, as a strategic threat for Europe.
"I do not think that a responsible European Leader can place the future security of their country in the United States' hands, as European countries have done, of course, since the end the Cold War," Chris Chivvis said, the senior U.S. Intelligence Officer for Europe during Trump’s first term. "There's been a sea change in Europe."
In her State of the European Union address, delivered on Wednesday, Ursula von der Leyen, President of the European Commission captured the new mood.
In a speech lasting 70 minutes, in which she did not mention the U.S. once, the EU chief warned that the "international rules-based system is fractured" and stated that Europe "must urgently reinvent our partnerships." She then invited Canada to be the EU's "associate members," signaling a closer cooperation on issues such as defense, trade, and others. After the speech, Canadian Prime Minister Mark Carney received a standing applause.
EUROPE REVOLUTIONS
The European governments, at least publicly continue to express their confidence in the Alliance. Portugal, Norway Germany and Spain, four governments who responded to requests for comments, said NATO remains united despite recent tensions. Norway called the U.S. "our most important allie" while Portugal stated that NATO would be impossible without it. A spokesperson for the Federal Foreign Office in Germany said that U.S. contractors continue to account for "a significant share" of German procurement.
Many European officials say that for NATO to be effective in deterring Russia and other enemies, they must believe the U.S. will protect Europe. Recent opinion polls have revealed that a majority of Europeans do not believe that the U.S. will defend Europe, and that a record number dislike Trump and mistrust his country.
According to a Pew Research Center poll conducted in July, China is now seen as more favorable than the U.S. by most of the 36 countries that were surveyed. This includes nine NATO member nations: Canada, France Germany, Greece Italy, The Netherlands, Spain and Sweden.
In an interview, Senator Jeanne Shaheen said, "That is really troubling." She is the senior Democrat of the Senate Foreign Relations Committee, and the co-chairperson of the Senate NATO Observer Group. "They no longer view President Trump as an ally."
According to 12 current and former Western military and government officials, Trump's plans for Greenland have damaged trust the most.
Jody Thomas, Canada’s national security advisor for 2022-2024, said: "This isn't the United States that we knew." "What they are doing is no more reasonable, no longer rational."
In his speech in Davos, Trump said that he would not take control of the Danish territories by force. He still wants it. In August, he posted a photomontage on his social media page, which showed him towering over the mountains and houses of Greenland, with the words "Hello Greenland!"
(source: Reuters)