With This Economic Engine, the US Grows Richer from the Ukraine-Russia War
The United States defence industry is not merely a war machine, but also one of the most important drivers of the American economy.
The industry, known as the Defense Industrial Base (DIB), forms the fundamental foundation uniting military sophistication with the wheels of the national economy. Within it, thousands of factories, research centres, university laboratories, and software developers work together to create weapons systems that ensure military operations run without hindrance.
The US defence industry has an extraordinarily broad reach due to synergy between the private sector and government agencies. By definition, the US government views this industrial base as a global-scale industrial complex that enables the development of cutting-edge military technology, from the smallest components to giant aircraft carriers.
The fundamental characteristic distinguishing this sector from other commercial industries is the presence of the US Department of Defence (DoD), now renamed the Department of War, as the single largest buyer. In this highly centralised market, market direction is entirely determined by state needs, meaning safety standards and production pace must follow very strict protocols.
The industry’s strength also stems from its export dominance to foreign countries through two main channels. First is the government-to-government sales scheme, which provides certainty of state guarantees. Second is the direct commercial sales route from companies to foreign buyers with official licences. Both distribution channels have solidified the United States as the world’s largest exporter of military equipment.
In fiscal year 2024, the value of foreign sales reached a fantastic record of US$318.7 billion. Over the past four years, their global market share jumped dramatically from 35% to 43%, with supply reaching 107 countries. The surge in demand from Europe, particularly driven by pressing needs in Ukraine which absorbed 9.3% of total exports, was the key factor behind this record figure.
The Industry’s Five Giants
Within this industry, five major powerhouses control the landscape, often referred to as the “Big Five”: Lockheed Martin, RTX, General Dynamics, Boeing, and Northrop Grumman. These five companies play central roles in managing various strategic weapons programmes. The startling fact is that the combined operations of these five giants absorb approximately one-third of the total value of contracts issued by the US Department of War.
In fact, the total revenue of these five companies equals approximately 50% of the revenue of the world’s top 100 defence companies. Whilst dominated by these five giants, the ecosystem remains dynamic with the presence of other major players such as Huntington Ingalls Industries and the emergence of technology-based start-ups that continue to strengthen defence industry innovation going forward.
The Defence Industry’s Contribution to the US Economy
The defence industry’s significant influence on the US economy is clearly evident from the output it generates. According to data from the Aerospace Industries Association (AIA), the US defence and aerospace industry recorded total business activity of US$995 billion, equivalent to approximately Rp16.666 trillion (assuming an exchange rate of Rp16,750) in 2024.
This figure comprises US$556 billion in direct output and US$439 billion in indirect contributions from the supply chain. From this overall activity, the sector generated US$443 billion in economic value added, equivalent to approximately 1.5% of US Gross Domestic Product (GDP).
The industry also supports US$257 billion in labour compensation, meaning its impact is felt not only in large companies but also flows to workers, suppliers, manufacturers, logistics providers, and business communities across various states.
The scale of this industry is also very large in terms of workforce and business networks. Various US government studies indicate the DIB encompasses nearly 60,000 companies and employs over 1.1 million workers across all 50 states. This means each increase in defence spending affects not only military strength but also directly influences economic activity at the regional level.
US Defence Budget
The contribution to the economy is also evident in the sharp increase in US defence spending budgets.
Entering fiscal year 2026, the US government has set a budget ceiling of US$926 billion, a figure demonstrating efforts to modernise defence technology and substantially strengthen the supply chain. These enormous funds will flow into production contracts that animate the manufacturing sector, professional services, and logistics at the local level.
This upward trend is projected to continue through fiscal year 2027 with a proposed defence budget reaching US$1.5 billion. With such a massive flow of capital, the defence industry is no longer merely about national security, but a vital instrument for maintaining industrial competitiveness, driving civilian technology innovation, and ensuring long-term economic stability for the United States.