Deutsche Bank argues that rising defence spending will lower global savings, shrink current account surpluses, and reduce capital recycling into the U.S. The authors expect this shift to pressure the dollar as Europe, East Asia, and the Middle East redirect savings toward strategic autonomy.
How defence spending will shrink global imbalances and weaken US
Deutsche Bank
Oliver Harvey, Mallika Sachdeva
Research
10 Pages
Key Takeaways
Defence Spending Rises: NATO members committed to a 5% GDP defence target by 2035, while Japan targets 2% by 2027.
Savings Could Fall: Defence spending rose 17% of GDP in Japan from 1935 to 1938, showing rearmament can quickly absorb savings.
Dollar Faces Pressure: Deutsche Bank estimates a $500 billion defence gap at 3% of GDP and $1.2 trillion at 5% of GDP.
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