BALTICS - MAR. 2026
JAPAN - Dec. 2025
VIETNAM - Aug. 2025
FRANCE - JUN. 2025
GERMANY - APR. 2025
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BALTICS - MAR. 2026
JAPAN - Dec. 2025
VIETNAM - Aug. 2025
FRANCE - JUN. 2025
GERMANY - APR. 2025
As the Baltic countries—Estonia, Latvia, and Lithuania—rapidly modernize their military infrastructures to secure NATO’s eastern flank, they are emerging as a high-growth corridor for U.S. aerospace and defense exports. Driven by historic defense spending reaching as high as 5% of GDP and a deep commitment to NATO interoperability, these three allies offer U.S. companies streamlined procurement processes and opportunities for real-world technology testing and integration. From Estonia’s leadership in cyber resilience and space cooperation to Latvia’s drone production hub and Lithuania’s focus on advanced missile defense and ISR, the Baltic region represents a strategic entry point for U.S. companies interested in the European defense market.
Estonia: High-Investment Defense Cycle and Digital Resilience
Latvia: A Leading Hub for Tactical UAS and Infrastructure Protection
Lithuania: Ambitious Modernization and Multi-Domain Defense
2026 Events in the Baltics:
Contact Information
Guntars Vicmanis, Commercial/Economic SpecialistVicmanisG@state.gov
Reene Moschella, Commercial AdvisorMoschellaR@state.gov
Jonas Vasilevicius, Commercial/Economic SpecialistVasileviciusJ@state.gov
Executive Summary Japan offers a lucrative market for imported aircraft, aircraft parts, and engines. U.S. firms have an overwhelming presence in the market due to long-standing relationships, some spanning over 70 years, with domestic manufacturers and trading firms. U.S. firms are presented with opportunities in the market as the domestic industry undertakes international projects, develops transport and patrol aircraft for defense, as well as small jet engines for civil aviation.
Commercial Aerospace U.S. firms continue to dominate Japan’s aerospace sector, leveraging long-standing partnerships and expanding involvement as Japanese companies deepen their role in international defense and civil aviation projects. The industry is steadily regaining momentum toward pre-COVID levels, with stability returning across the supply chain and renewed opportunities for growth. Japanese suppliers remain integral to Boeing programs, supporting monthly production of about 7 Boeing 787s with prospects to ramp higher, while sustaining 3–4 Boeing 777s as the transition to the 777X advances. Although certification of the 777X by the Federal Aviation Administration is still pending, its approval is expected to catalyze a significant rebound in wide-body output, complementing the upward trajectory of 787 production. The yen’s depreciation from ¥140 to ¥150 per USD enhances export competitiveness and strengthens global integration, positioning Japan’s aerospace suppliers for expansion. In 2023, Japan imported $10.4 billion worth of aerospace products, with 62.4% sourced from the United States, and continues to maintain duty-free importation of aircraft and parts under the WTO Agreement on Trade in Civil Aircraft.
Defense Japan is increasing its defense budget in response to a challenging regional security landscape, underscored by North Korean missile advancements and China’s rising influence. The Cabinet approved a historic $55.9 billion budget for FY2024, marking a 16.5% increase from the prior year, to enhance capabilities across naval, land, and air dimensions, including the modification of Izumo-class carriers for F-35B operations, acquisition of new armored vehicles, and procurement of F-35A and F-35B fighter jets.
The budget focuses on advancing Japan’s defense technology research and development, with significant investments in stand-off defense, counter-hypersonic capabilities, and the Global Combat Air Program (GCAP) in collaboration with Italy and the UK.
Space Japan’s space industry, renowned for its world-class industrial and technological prowess in R&D, is shifting its focus towards the commercialization of space technology, with concerted efforts from the Japanese government and industry to grow its space business. This pivot builds on a long-standing international collaboration in space development and exploration, initiated by a Japan-U.S. Joint Communique in 1969, and has seen Japan engaging in significant projects primarily led by NASA, with expectations for expanded collaboration in space exploration and science.
Recent developments have further strengthened space cooperation between the U.S. and Japan, including the signing of the Gateway Implementation Agreement in November 2022 as part of NASA’s Artemis missions for lunar exploration, offering a JAXA astronaut a crew position on a future Artemis mission. Additionally, Japan’s early commitment to the ISS extension until 2030, the signing of the Framework Agreement for Cooperation in Outer Space in January 2023, and subsequent dialogues and plans for a trade mission in May 2023, underscore a deepening partnership aimed at advancing space science, exploration, technology, and commercial opportunities between the two nations.
Leading Sub-Sector Drones Japan’s drone industry, recognized for its advanced technological base and strong innovation capacity, is increasingly shifting from research and experimental applications toward broader commercialization and integration into both public and private sector activities. This evolution reflects Japan’s growing emphasis on uncrewed aircraft systems (UAS) as critical enablers of logistics, infrastructure monitoring, disaster response, and air mobility, supported by close collaboration between government agencies and industry stakeholders. Building on Japan’s history of technological excellence and international partnerships, the country is positioning itself as a leader in the safe and sustainable deployment of drone technology.
Recent developments have highlighted the momentum of this sector. The Ministry of Defense and other agencies have identified a range of drone capabilities as priorities, including long-endurance UAVs, ship-based small UAVs, mid-range upgraded UAVs, close-range UAVs, and mini UAVs capable of air patrol. While U.S. drone exports to Japan totaled $10 million in 2022, subsequent years have seen a moderate decline, underscoring the importance of renewed engagement and collaboration. At the same time, Japanese policy shifts in 2023 allowing greater technology exchange with international partners have created new pathways for bilateral cooperation. These trends, combined with the limited scale of Japan’s domestic drone production capacity, highlight opportunities for U.S. companies to expand their role in supplying advanced systems, life-cycle support, and sustainability-focused upgrades. Together, these developments point to a future of deepening collaboration in drones and uncrewed systems that advances innovation, enhances operational capability, and contributes to shared prosperity between the United States and Japan.
Upcoming Events Japan Drone & Counter-UAS Business Development Mission
Contact Information
Sayoko Koto, Senior Commercial Specialist Sayoko.Koto@trade.gov
MARKET OF THE MONTH: VIETNAM Vietnam’s defense budget was $8.36 billion in 2024 and is projected to grow by 7.9% to $9 billion, according to a 2025 BMI industry report. Over the medium-term forecast period to 2029, Vietnam’s defense expenditure will increase by an average of 5.9% per year and reach $11.33 billion by 2029.
Domain awareness and maritime security are key areas of focus for Vietnam’s defense procurement and activities. This encompasses air force, air defense, surface, and subsurface capabilities. Defense equipment suppliers and subcontractors can expect increased demand for naval combatants, aerial defense, and systems that support command, control, communications, computers, cyber, intelligence, surveillance, and reconnaissance (C5ISR) capabilities.
Vietnam Defense Policy and International Engagement According to the Vietnam Defense White Paper in 2019, Vietnam maintains a non-aligned policy known as the “four no’s”, which entails no military alliances; no siding with one country against another; no foreign military bases and no use of Vietnamese territory to oppose other countries; and no use of force or threat of the use of force in international relations. However, Vietnam’s military does maintain some flexibility in its international engagements, depending on its various national security interests.
The strategy also demonstrates Vietnam’s steadfast stance on territorial sovereignty and maintaining regional stability. Central to Vietnam’s military modernization efforts is a diversification of Vietnam’s international defense partnerships. Vietnam is seeking to reduce its reliance on Russia, which has historically served as its primary supplier of defense equipment, and is actively seeking new partners, modern equipment and solutions, and training.
Leading Sub-Sectors Although the majority of Vietnam’s armed forces require modernization of ageing equipment, the Vietnam People’s Navy will continue to receive the lion’s share of investment.
Maritime Capabilities
The Vietnam Coast Guard (VCG) also receives great attention and investment from the Vietnamese government’s modernization efforts. Instead of building large naval ships, Vietnam has prioritized equipping the VCG with high-speed, mobile, large patrol ships capable of operating offshore for long hours and under harsh weather. In addition, aircraft that can provide wide surveillance in the maritime domain are also a priority.
Air Force
Information Communications Technology and Electronic Warfare
Opportunities Since the United States formally announced the lifting of the ban on arms sales to Vietnam in May 2016, U.S. firms have seen growing interest in U.S. technologies, equipment, and expertise.
U.S. defense products have a long-standing reputation for offering cutting-edge technology, high precision, and durability. U.S. defense and security suppliers are competitive in areas that require tailored or high-performing technology, including maritime domain awareness, aerial defense, anti-access/area denial capabilities, surveillance equipment, C5ISR, and electronic warfare solutions. A full-package approach emphasizing an effective sustainment program and follow-on technical assistance would pay dividends in the long run and pave the way for future procurements.
Events Vietnam International Defense Expo : In December 2022, the Ministry of National Defense organized its inaugural Vietnam International Defense Expo, offering an excellent opportunity for foreign OEMs, system integrators, assemblers, and service providers to introduce state-of-the-art equipment, weapons, and technologies to the Vietnam market. The three-day event was attended by 170 companies from 30 countries.
In its second rendition, Vietnam International Defense Expo 2024 offered Vietnam a chance to share its defense requirements and attract global attention, amid its continued military diversification efforts. The expo hosted the first-ever U.S. pavilion, with U.S. firms of all sizes participating to display their equipment and explore collaboration opportunities with Vietnamese end users.
The next Vietnam International Defense Expo is expected to be held in Hanoi in December 2026. The event will be another great opportunity for U.S. companies to showcase strategic technologies and products in this growing market.
Resources For more information about the Vietnamese Defense and Security industry, please contact:Nhung Nguyen
Nga Hoang
Reported revenue for the French civil aerospace industry in 2024 grew to 57.4 billion euros (source: GIFAS) out of total non-consolidated aerospace and defense revenues of 77.7 billion. The aerospace and defense industry exported approximately 82% of its consolidated turnover, and the civil sector represents 74% of revenues. The defense sector climbed 13% to 20.3 billion euros, driven by growth in export deliveries (+19%) and in the domestic market (+11%).
Aerospace Five aircraft manufacturers account for most of the French market: Airbus (large commercial aircraft and military aircraft), Airbus Helicopters (civil and military), Dassault Aviation (high-end business jets and the Rafale Figher jet), ATR (passenger and cargo turboprop aircraft for regional transport, an Airbus JV with Italian firm Leonardo), and Daher (TBM and Kodiak light aircraft and business turboprops). There is also a growing ecosystem of small manufacturers offering light electric or hybrid aircraft or vehicles suited for urban air mobility. The Safran Group is also involved in both civil and military defense, manufacturing several military drones, as does Airbus Defence & Space and French electronics group Thales.
Defense While France is not a geographically large country, it is now the world’s second largest arms manufacturer and exporter after the U.S., before Russia and China. France considers the United States as its major competitor in defense sales. France is one of the few countries in the world that maintains full-spectrum military production capabilities; as a nuclear nation, it makes its own equipment, from small tactical weapons to a nuclear-powered aircraft carriers and ballistic missiles. France is a strong supporter of its own and the EU’s technology and industrial base. Avoiding components in its defense supply chains that are subject to ITAR is a clear competitive advantage to French primes when exporting - and most defense equipment is built for export. France does occasionally buy complete U.S. systems - for example General Atomics Reapers or Lockheed Martin C-130Js – when it has no local alternative to fill a capacity gap. It will generally buy via a Foreign Military Sales process when this is the case.
Space France’s space sector continues to grow, with about 60 companies working exclusively in this sector. French trade association GIFAS reports consolidated sales for 2024 at about 4.8 billion euros, which is about half of the value of the entire European space industry.
Upcoming Events For companies seeking in-person opportunities to enter the French market, there are several upcoming events of interest:
Paris Air Show JEC World Eurosatory Euronaval Aeromart The U.S. Commercial Service is located in U.S. Embassies & Consulates worldwide and major U.S. cities across the country. Contact us to learn more about how we can assist your exporting business.
Meet Cara Boulesteix
Market of the Month – Germany The German aerospace and defense sector offers plenty of opportunities for U.S. companies. The best way of getting exposure to the German market is by participating in trade shows. Germany is home to some of the major European aerospace trade shows. These shows are ideal platforms for liaising with potential partners and buyers from Germany and multiple other European markets. Entering the German market is a long game, however. Beyond the trade show participation, cooperating with local firms is a preferred way for U.S. companies when bidding on major contracts.
Aerospace & Defense Let’s take a look at the market figures. Germany has the third-largest aerospace and defense market in Europe, with 2023 revenues at EUR 46 billion or USD 49.7 billion, following the UK at GBP 88.4 billion or USD 109.9 billion (including land defense systems) and France at EUR 70.2 billion or USD 75.9 billion. The figures for 2024 will be published by the German Aerospace Industries Association in May 2025. They were not available at the time of this writing. Some three quarters or USD 33.3 billion of the German production are exported. Regarding the overall development, BDLI president Dr. Schöllhorn stated the following: “Industry figures for 2023 feature both pros and cons. We are delighted that our industry has overcome the COVID years. We also see further growth in both civil aircraft construction and the defense sector. However, there are significant issues related to supply chain reliability and capacity. Increasing regulatory requirements, such as complex national and European supply chain laws, place additional burdens on companies. And we need reliability and predictability in the growth of the defense budget. Uncertainty in procurement decisions is already threatening manufacturing capacity and know-how, especially at SMEs. Finally, we are at risk of being left behind internationally in the space sector if European countries/companies/players do not join forces more decisively and recognize and defend the strategic dimension of independent access to space and its use.” These comments highlight some of the challenges that the German aerospace industry is facing. Overall, it is in healthy condition though. The major industry players (Airbus Defence and Space, Airbus Helicopters, Airbus Aerostructures, Diehl, Hensoldt, IABG, Liebherr, MBDA, and others) have taken the right steps to shape the industry trends until 2040. The 2023 revenues were distributed as follows:
Civil aviation, EUR 33 billion or USD 37.5 billion vs. EUR 28 billion in 2022 Military aviation, EUR 10 billion or USD 10.8 billion vs. EUR 8.4 billion in 2022 Space systems, EUR 3 billion or USD 3.2 billion vs. EUR 2.6 billion in 2022. Strategic Considerations Let’s also take a look at the strategic considerations of the German government. Aerospace stands out in this aspect. The Federal Ministry of Economic Affairs and Climate Action (BMWK) lists aerospace as a key industry with high growth rates and a strong industrial core in Germany. The “2020 Technology Strategy of the German Aerospace Industry” builds on BMWK’s earlier “Aerospace Strategy”, underlining the particular importance of the aerospace sector for Germany as an industrial country both technologically and economically. It was adopted by Germany’s former three-party coalition government (SPD, Greens, FDP) in December 2021. An update is expected once the incoming coalition (CDU/CSU, SPD) has been formed. The coalition talks are currently underway.
Regulatory Provisions U.S. companies should be aware regulatory provisions on the European side, both on the EU and on the national level. The U.S. Commercial Service closely monitors any regulatory changes and supports U.S. companies by conducting frequent and active outreach to the relevant authorities in Germany, such as the Federal Office of Bundeswehr Equipment, Information Technology and In-Service Support (BAAINBw) in Koblenz, Rhineland-Palatinate. We also follow the latest aerospace, defense and security-related policy developments and discussions in Germany. On an international level, we gain insights from organizations like the Aerospace, Security and Defence Industries Association of Europe (ASD) and the Aerospace Industries Association (AIA) to understand their positions on transatlantic trade issues and communicate U.S. objectives.
Opportunities Opportunities for U.S. aerospace and defense manufacturers with interest in the German market exist in the following segments:
Commercial aircraft Business jets Turboprops Helicopters eVTOLs UAVs Aerostructures Propulsion systems Subsystems for aerospace vehicles Military aircraft, air defense systems Spacecraft and launch systems Communications systems Earlier this decade, the Bundeswehr’s EUR 100 billion (USD 108.2 billion) Bundeswehr special fund promised to be the biggest opportunity across the board. The special fund was announced by then-Chancellor Scholz in February 2022 and approved by the German parliament in June 2022.
As of April 2025, Germany considers the possibility of allocating 200 billion euros to bolster its defense capabilities. This could result in German defense spending remaining permanently above 2 percent of the GDP, or even reach up to 3.5 percent. The U.S. Commercial Service Germany will observe the development.
Upcoming Events 15th Aviation Forum, December 10-11, 2025, Hamburghttps://www.aviation-forum.com/ Aircraft Interiors Expo, April 14-16, 2026, Hamburghttps://www.aircraftinteriorsexpo.com/ AERO, April 22-25, 2026, Friedrichshafenhttps://www.aero-expo.com/ ILA Berlin, June 10-14, 2026, Berlinhttps://www.ila-berlin.de/en Meet U.S. Commercial Specialist from the U.S. Embassy in Germany. Moritz Holst
