NATO Defense Spending and Space Economy Growth Drive Rare Earth Demand
By 2025, all NATO allies are projected to meet or exceed a 2% GDP defense spending threshold, totaling $1.4 trillion. This shift, alongside a projected rise in space defense budgets to $180 billion by 2035, highlights the intertwining of defense, space, and rare earth elements, crucial for modern technologies.
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By 2025, NATO defense expenditures are expected to surpass $1.4 trillion, with all 32 allies reaching a minimum of 2% of GDP. In June 2025, NATO leaders set a target of 5% of GDP by 2035, allocating 3.5% for core defense and 1.5% for critical infrastructure and cybersecurity.
Concurrently, state spending on space defense is projected to grow from $66 billion in 2024 to $180 billion by 2035. The rise in military and space expenditures is increasing demand for rare earth elements, which are essential for technologies like satellites and defense systems.
China's dominance in rare earth production, controlling 70% of global output, poses risks, especially following recent export controls. Institutional investors must consider the interdependencies between these sectors and their associated risks in portfolio planning.
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