On the morning of the U.S. midterm elections, U.S. President Donald Trump announced that the roughly $4 billion a year in American military aid to Israel would be cut off at the end of 2026. Israel’s own defense and finance officials reportedly learned the details from the news. By the next morning, Democrats had won both houses of Congress.
Whatever happens to the last two years of the current agreement, the direction is set. The political ground under U.S. aid has shifted in both American parties.
In February, for the first time in Gallup’s quarter-century of tracking, more Americans sympathized with the Palestinians than the Israelis. It’s foolhardy to hope that shifts back any time soon. Moreover, Europe and the United States, when under the Biden administration, have shown they will turn off the tap in the middle of a war.
The question is no longer whether Israel becomes less dependent on American arms grants; it’s whether it does so by design or default.
Washington is offering a bridge. Bipartisan provisions in the 2027 defense bill would move support out of the foreign aid budget and into the Pentagon budget, framed as joint development and co-production.
For F-35 and F-15 fighter planes, and other big-ticket platforms Israel can’t build itself or replace with other strategies and platforms, that is a valuable safety net. But it is a bridge to a more independent tomorrow, not a destination.
It deepens integration, draws Washington further into Israeli decisions, and keeps Israel in the posture of a client waiting on Washington, rather than a loyal ally that can’t be taken for granted. It also endangers Israel by subjecting it to the unpredictable gyrations of U.S. politics.
Israel is not going to build its own stealth fighter. But most of the leverage a supplier holds over Israel in wartime has nothing to do with fighter jets. It lives in the things you burn through: bombs, guidance kits, shells, interceptors, spare parts and the foreign components buried inside Israeli-made systems. The war that began on Oct. 7, 2023, showed how long and how munitions-hungry a multi-front war can be.
That is where a mid-war supply “pause” by allies bites.
Call the strategy asymmetric autonomy: Staying integrated with the United States for strategic platforms and become self-sufficient in what matters most in a long war, while allowing Israel to develop alternatives to bigger, more complex platforms. Ukraine did this, out of necessity, in the development of its multifaceted drone warfare program.
Asymmetric autonomy includes building research and development and manufacturing capacity in Israel for the munitions systems and subsystem components described above, as well as alternatives to the expensive weapons systems for which Israel is reliant on the United States.
There is also the need to develop an offensive ground-to-ground missile capability of scale; reduce reliance on manned aircraft; bend the cost curve by investment in perfecting existing laser solutions versus expensive interceptor missiles; put Israel’s longstanding skills in satellites and space to greater advantage; and develop critical weapons maintenance subsystems, such as tank gearboxes.
This isn’t a divorce. It’s Israel becoming a partner that can’t be held hostage.
A forward open architecture is critical for weapons that are purchased from abroad. Every foreign platform Israel buys should accept Israeli weapons and software without the manufacturer’s permission.
This is not starting from zero. Since 2025, the Defense Ministry has ordered heavy bombs, a national explosives plant and a local 155mm shell line from Israeli company Elbit, whose factories are running three shifts. What’s missing is scale, money and a long-term commitment.
Israeli defense spending is running near 8% of GDP, and debt has climbed to 68.5%. But the lost grant, $3.3 billion, is about half a percent of an economy worth some $700 billion.
A one-point VAT increase to 19% would raise roughly NIS 7.5 billion a year—most of the gap. Yes, VAT is regressive. But Germany charges 19%, France and Britain 20%, and the Nordics 25%.
This increase should be paired with real clawbacks of sectoral subsidies and coalition side-deals, putting a slice of gas royalties to work and letting taxes on record defense exports—$19.2 billion in 2025—recycle into research and development.
Here is the part that gets too little attention: High tech is 18% of Israel’s GDP and 58% of its exports, but it employs only about 11% of the workforce, a share that has been flat since 2021 and is further threatened by the AI revolution and the high cost of talent in Israel.
Meanwhile, Israel has the second-highest poverty rate in the OECD. Startup Nation made a narrow slice of the country very rich. It didn’t lift most of the center, the Negev or the Galilee, and it was never going to.
Defense manufacturing is different. It needs engineers, but also machinists, chemical technicians, welders and inspectors. Factories can go in Dimona, Kiryat Shmona and Haifa. Offer them the same investment grants and tax breaks that brought Intel’s fabs to Kiryat Gat, and they become a real on-ramp into the workforce for “regular Israelis,” Haredi men, Arab Israelis and reservists coming home from months of service. The organization Yozma seeded Israel’s venture capital industry in 1993. An arms industry could be the second Israeli economic miracle, and a far more widely shared one.
All of this would buy diplomatic clout. The Arrow 3 defense system, developed with about 80% American funding, could not be sold to Germany until Washington signed off. Barak MX, an entirely Israeli-developed and funded system, needed no one’s permission. It has been sold to India, Azerbaijan, Cyprus, Slovakia and other countries, earning Israel Aerospace Industries around $10 billion in eight years.
Technology that Israel owns outright is technology it can use to build partnerships on its own terms.
If this is so sensible, why isn’t it happening at full speed? Because the obstacles are institutional and political, not technical. The Israeli Air Force prefers expensive manned platforms to drones and mass precision munitions. Iron Dome itself had to be forced on a reluctant defense establishment. Coalition politics protect sectoral subsidies. American defense firms, with deep ties to Israeli industry, which will be eating some of their lunch, will push back.
That is why all this must be built as a national strategic program, with elected leaders, career professionals, the IDF and Israeli industry all at the table. A plan owned by one minister will not outlive the next budget fight.
To the former officials who warn that talk of independence invites Washington to step back: This isn’t a divorce. It is becoming a partner that can’t be held hostage.
Israel has done this before: When France shut the door in 1967, Israel built the Kfir combat aircraft and the Merkava tank. When venture capital didn’t exist, Israel created an industry.
The aid era is ending. Israel can treat that as a loss to be managed and mourned, or as the starting gun for its next great build-out. The money is findable. The talent is there. What’s needed now is the will to unite in this mission.
