Three Defense Sector Trends to Watch in 2018

January 25, 2018

By: Alex Cooke, senior consultant, TIP Strategies


The major theme for the US defense sector in 2018 continues to be uncertainty. Congress remains under immense pressure to raise defense spending due to ongoing military operations, decreased readiness, and aging weapons systems. However, addressing these challenges will require Congress to pass a budget that removes the spending caps mandated by Budget Control Act of 2011, which Washington currently seems unable to accomplish.

1. Defense Spending and Procurement

On January 19, 2018, the Trump Administration revealed its new National Defense Strategy [PDF]. Going forward, the Pentagon will place a higher priority on preparing for potential high-intensity conflicts with near-peer adversaries (namely, China and Russia). This new strategy will require increased levels of US defense spending on big ticket weapons and hardware. Large procurement programs being pushed by the administration include modernizing the US nuclear force, growing the number of ships in the Navy’s fleet, accelerating the deployment of ballistic missile defenses, and integrating electronic warfare systems into all service branches.

2. Long-Term Planning by the Pentagon

Federal budget uncertainty prevents the Pentagon from proceeding with long-term planning initiatives related to staffing and bases. Therefore, we are unlikely to see critical decisions made in 2018 regarding a future Base Realignment and Closure (BRAC) round or force levels within the Army.

3. Private Sector Activity for Aerospace and Defense

Despite the dysfunction surrounding the US federal budget, the aerospace and defense sector is poised for continued growth in 2018. The United States remains by far the world’s largest arms supplier, and global demand for advanced US weaponry shows no signs of abating. In fact, ongoing conflicts and rising tensions in the Far East and Europe will only stoke increased global demand for American arms.

Despite all the disarray and turmoil at home and abroad, let’s hope peace prevails in 2018.