U.S. to trade $4B Israel aid for arms

American taxpayers will no longer fund $4 billion in annual military aid to Israel starting in 2027. President Donald Trump announced on Tuesday that the United States will shift from granting this aid to selling weapons directly to its Middle Eastern ally.

The change means U.S. defense contractors will receive the funds through direct sales rather than through foreign military financing grants. This shift alters how federal money enters the defense supply chain.

Trump stated that Israeli Prime Minister Benjamin Netanyahu initiated the discussion. The two leaders have reportedly talked about the arrangement for two years.

The president cited the high cost of the program as a primary reason for the switch. He described the current aid package as a substantial expenditure for the United States that Israel no longer requires.

“You can consider it barter. You can consider military aid or cash,” Trump said on Fox News. “Look, we give them $4 billion of things and money, and they don’t need it. And I was approached by Bibi Netanyahu, and we’ve been talking about it for a couple of years because it’s a lot of money.”

The current aid structure stems from a 2016 agreement signed by President Barack Obama. That deal provided $38 billion over ten years, or $3.8 billion annually. The terms required Israel to spend the funds on American military products.

This new model maintains the flow of money to U.S. manufacturers while changing the transaction type. Under the previous system, the funds were grants. Under the new system, they become sales invoices.

Trump noted that the $4 billion figure has become a focal point for political opponents. He specifically mentioned Michigan Senate candidate Abdul El-Sayed, who has used the payment as a critique of U.S. support for Israel.

“The left uses the $4 billion payment, that everybody knows about, it’s no secret, as a signal of unfairness,” Trump said. “And we can’t allow that to happen. I don’t like that, because it’s too easy. It’s almost too easy a target. And Bibi and I have been talking, and we’ve agreed. He was very understanding of it.”

The decision comes after years of debate in both nations regarding the sustainability of the aid package. Netanyahu told The Economist in January that he wanted to taper off U.S. military aid over the next decade. He described such a change as already being in the works.

The shift impacts the U.S. defense industry. Much of the current assistance is foreign military financing, which ensures the money returns to the U.S. economy. If Israel does not purchase the same volume of American materiel, defense firms may see a drop in revenue.

Recent data shows the scale of U.S. support. A study published last year found that the U.S. provided at least $21.7 billion in military assistance to Israel after the Gaza war began in 2023. Another report from Brown University estimated that the U.S. spent roughly $10 billion more on security operations in the broader Middle East over the previous two years.