US Defence Secretary Hegseth tells Asian allies to up defence expenditure to match Europe's 5% of GDP
US Defence Secretary Pete Hegseth speaking at the first plenary session on United States' new ambitions for Indo-Pacific security at Shangri-la Dialogue 2025 on May 31. ST PHOTO: KEVIN LIM
Shangri-La Dialogue 2025 US Defence Secretary Hegseth tells Asian allies to up defence expenditure to match Europe's 5% of GDP
SINGAPORE -- The US expects Asian countries to increase their defence spending to match levels that Washington expects of European allies, since they bear the brunt of the 'threat' of China and North Korea in their backyards.
That was the message that US Secretary of Defence Pete Hegseth brought on May 31 to the leading annual forum of global security and defence leaders in the Asia Pacific at the 22nd Shangri-La Dialogue.
'It is hard to believe I can say this – but Asian allies and partners should look to countries in Europe as a new-found example. Nato members are pledging to spend 5% of their GDP on defence, even Germany,' the former Fox News presenter said.
Mr Hegseth communicated to European allies this expectation at the Munich Security Conference in February.
'How can it make sense for countries in Europe to do that while key allies and partners in Asia spend far less in the face of a far more formidable threat from Communist China, not to mention North Korea?' he added.
'Ultimately, a strong, resolute, and capable network of allies and partners is our key strategic advantage. China envies what we have together.'
Since the Trump administration returned to office at the turn of 2025, Washington has been doubling down on its demands that its allies should bear a greater responsibility for their conventional defences and cannot expect the US to bear the financial burden alone.
For a generation, the US ignored the Indo-Pacific, but under the Trump administration, 'we are here to stay', Mr Hegseth said.
Like Singapore's founding Prime Minister Lee Kuan Yew, 'President Trump's approach is grounded in common sense and national interests, built on a willingness to work with others while respecting mutual self-interest, and informed by an understanding of military strength but shaped by a preference for engaging on the basis of commerce and sovereignty — not war,' he said.
He added: 'These two historic men share a willingness to challenge old ways of doing things that no longer make sense. Under President Trump's leadership, we are applying this common sense approach here in the Indo-Pacific and throughout the world.'
While China is reportedly the world's second largest defence spender in the world after the US, Beijing's reported defence expenditure typically does not exceed 1.5 per cent of its GDP, compared to the 3.5 per cent that the US typically maintains every year.
In 2024, Singapore said it plans to cap its defence outlay to about 3 per cent of its GDP annually on average for the next decade.
The US is bounded by treaty to defend the Philippines when the South-east Asian archipelago is under attack and has been deeply committed to the defence of Taiwan, a self-governing territory that Beijing claims as its own to be reunified by force if necessary.
Clement Tan is an assistant foreign editor at The Straits Times. He helps to oversee coverage of South Asia, the US, Europe, the Middle East and Oceania.
Join ST's WhatsApp Channel and get the latest news and must-reads.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Times
40 minutes ago
- Business Times
Obscure tax item in Trump's Bill alarms Wall Street
BURIED deep in the more than 1,000-page tax-and-spending bill that President Donald Trump is muscling through Congress is an obscure tax measure that's setting off alarms on Wall Street and beyond. The item – introduced in legislation that passed the House last week as Section 899 and titled 'Enforcement of Remedies Against Unfair Foreign Taxes' – calls for, among other things, increasing tax rates for individuals and companies from countries whose tax policies the US deems 'discriminatory.' This includes raising tax rates on passive income, such as interest and dividends, earned by investors who are potentially sitting on trillions in American assets. Cloaked in technicalities, the implication of the 'revenge' measure, as it's quickly becoming known, is clear to analysts: If signed into law, it would further drive away foreign investors at a time when their once ironclad confidence in Treasury bonds and other US assets has already been shaken by Trump's erratic trade policies and the nation's deteriorating fiscal accounts. 'We're already dealing with a market where Treasuries, to foreign investors, probably aren't the most attractive investment,' said Michael Brown, a strategist at Pepperstone Group, a brokerage firm founded in Melbourne whose clients are all outside the US. Brown said he got so many inquiries from concerned clients that he quickly put together a report breaking down the measure. 'If you're now talking about massively unfavorable tax treatment, then it's just another reason to stay away.' Among those potentially affected: institutional investors including sovereign wealth funds, pension funds and even government entities, as well as retail investors and businesses with US assets. The proposed tax is separate from Trump's tariff-heavy trade agenda, which is now snarled in court, but the thrust is the same, and its aims align with some of the positions set forth by the economist Stephen Miran in a paper last November and those seeking a so-called Mar-a-Lago global restructuring accord. All seek to address perceived unfair treatment of the US by the rest of the world using targeted tools designed to put the country on a more even footing. But after years of foreign investors piling into US assets, experts fear the consequences of Section 899 may be far-reaching. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The provision amounts to 'weaponization of US capital markets into law' that 'challenges the open nature of US capital markets by explicitly using taxation on foreign holdings of US assets as leverage to further US economic goals,' George Saravelos, head of FX research at Deutsche Bank AG, wrote in a report on Thursday. 'We see this legislation as creating the scope for the US administration to transform a trade war into a capital war if it so wishes, a development that is highly relevant in the context of today's court decision constraining President Trump on trade policy.' Section 899 takes aim at countries including Canada, the UK, France and Australia that impose 'digital services taxes' on large technology companies such as Meta Platforms Inc. The clause also targets countries using provisions in a multi-country deal for minimum corporate taxes. The measure would boost the federal income tax rate on passive US income earned by investors and institutions based in the targeted countries, first by five percentage points, then rising by another five points each year to a maximum of 20 points above the statutory rate. 'Troubling' for bonds, dollar Morgan Stanley's strategists included the provision in frequently asked questions related to the tax-and-spending bill and concluded that Section 899 would weaken the dollar and European stocks with US exposure. Gilles Moec, the chief economist at AXA Group, said it could add to the pressure on long-term interest rates, which this month touched multi-year highs. Others see it dragging on the US currency. 'It's indeed sounds troubling,' said Rogier Quaedvlieg, senior US economist at ABN Amro Bank NV. 'By limiting new foreign demand, that would of course put pressure on the dollar.'' The risks related to the section 899 provision are seen by some as even more pressing after the US court order on Wednesday that blocked many of Trump's tariffs on imports. Tariffs are considered a key source of revenue to fund Trump's tax cuts, a signature part of his 'big, beautiful bill.' Without them, the question is where the administration will find the money to fund them. The intent of the measure appears similar in spirit to some ideas put forth in November by Miran while he was still working at hedge fund Hudson Bay Capital. Miran, now chairman of the White House Council of Economic Advisers, raised the possibility of imposing 'user fees' on foreign investors in Treasuries as one option to help push down the dollar and address global trade imbalances. 'The clause is clearly endorsed by the administration and designed to give Trump a negotiation tool for pressuring countries to drop digital services taxes and global minimum corporate income taxes, which he sees as unfairly targeting US multinational companies,' wrote Economist Will Denyer and Tan Kai Xian at Gavekal Research. 'The problem is that before Trump has a chance to use the new tool, its very existence may unsettle bond markets.' What strategists say 'With tariff revenue more uncertain and less likely to offset tax cuts in the GOP budget bill, traders need to be prepared for tax changes on foreign holders, ultimately reducing demand for American financial assets.' – Michael Ball, Markets Live macro strategist For now, the market reaction to Section 899 appears muted, at best. Still, US assets as a whole have been underperformers this year as Trump's policies put a dent in the narrative of the 'America exceptionalism.' The S&P 500 is up about 0.4% this year, compared with a 20% gain in the German benchmark and a 18% rally in Hong Kong. The Bloomberg Dollar Index slumped about 7%. The US Treasuries returned 2%, trailing the 5% gain in the global government bonds in dollar terms, according to data compiled by Bloomberg. Under the surface Section 899 is likely to remain in the final version of the reconciliation package, which is now being reviewed in Senate, because it has broad Republican support, according to Signum Global Advisors. While some are skeptical if the Section 899 would survive on concern it would dampen foreign investment into the US, Signum Global Advisors predicts it will likely remain in the final version of the reconciliation package, in part because it has broad Republican support. 'We believe the president's viewpoint is that there is such immense foreign appetite to invest in the US that it is not at risk of being thrown off course,' according to Charles Myers, a former Wall Street executive who runs advisory firm Signum, and Lew Lukens, a partner at the firm. To Pepperstone's Brown, the reason markets haven't reacted yet is because investors hadn't fully grasped the significance of the clause. But they're starting to now. 'It's only as the dust has settled that people are thinking that maybe there are some things lurking under the surface of the bill we should pay a little bit more attention to,' said Brown. 'And I think this section 899, this is probably one of them.' BLOOMBERG
International Business Times
an hour ago
- International Business Times
Who Is Gabrielle Cuccia? Pro-MAGA Journalist Fired for Criticizing Pete Hegseth's Treatment of Press at Pentagon After Signal Scandal
A pro-MAGA reporter was has been fired her job after criticizing Defense Secretary Pete Hegseth over the way he handled the media at the Pentagon. Gabrielle Cuccia, a self-described 'MAGA girl' and longtime supporter of President Donald Trump, has never shied away from expressing her admiration for him. However, during her time as the chief Pentagon correspondent for the pro-Trump network One America News, Cuccia published a tell-all article on her personal Substack, highlighting the shortcomings of Hegseth's leadership, which eventually led to her getting fired. "If you want the best case study for the death of the MAGA movement — look no further than the Department of Defense," she wrote. Infuriating Hegseth "People sleep on the Pentagon. They don't realize what's been simmering at the bottom for weeks, months, sometimes even years." Cuccia raised concerns that Hegseth began restricting media access following his Signal app controversy, where a journalist was mistakenly included in a group chat in which Hegseth shared sensitive details about an upcoming strike on Houthi targets in Yemen. According to Cuccia, after the incident, Hegseth took steps to cut off important lines of communication between the media and his team in an attempt to "reduce the opportunity for in-person inadvertent or unauthorized disclosures." "Think of every time you hear a journalist reference a source as "Defense Official" or something abstract... a lot of times, it's coming from these guys," she revealed about the Pentagon press office. "And they are always there to provide additional context, field questions, and relay the reality of ops in an unclassified manner." Cuccia's article was published on Monday, and by Thursday, she was asked by her employer to return her Pentagon access badge. The following day, she was fired, she told CNN. In her piece, Cuccia criticized Hegseth for his lack of openness, accusing him of avoiding press briefings and claiming that his staff intentionally withheld details of his schedule until it was too late for journalists to attend. "Over at the White House, the Administration understands the freedom of the press, and keeps the door open anyway," she said. "They would certainly not field questions *before* said press briefing." Too Harsh a Punishment Cuccia claimed that during one press briefing, members of Hegseth's team contacted her to find out what question she planned to ask if given the chance to speak at the conference. Believing they just wanted to be well-prepared for their first briefing and provide thorough answers, she shared her question. "Unfortunately, that was not the case," she said. "This article isn't to serve as a tearing down of the SecDef," she wrote. "This is me wanting to keep MAGA alive. Despite my loyalty to this movement, we are killing ourselves." Cuccia said the power behind the MAGA movement was sparked in 2015, when "America woke up" with a collective understanding that citizens would no longer treat the government's word as unquestionable truth. However, she noted that since those early days, the movement has noticeably drifted away from its original principles. "Somewhere along the way, we as a collective decided — if anyone ever questioned a policy or person within the MAGA movement — that they weren't MAGA enough. "I will always be MAGA, but consider this a love letter to what we have lost, what we must regain, and my final plea to Love Your Country, Not Your Government." Cuccia spoke out publicly for about her firing on Saturday, posting on Instagram: "I was once told that a former peer feared I was too MAGA for the job. I guess I was. I guess I am."
Business Times
2 hours ago
- Business Times
Chinese economy stays challenged but some consumer stocks offer potential: BOA
[SINGAPORE] While headwinds persist for the Chinese economy and consumer confidence stays low, a select range of stocks could defy broader market trends and outperform their peers, said the Bank of America (BOA). Despite improved market sentiment, the Chinese economy remains saddled by challenged consumption growth and elevated youth unemployment alongside deflationary pressures, BOA analysts noted in a report last Thursday (May 29). However, stocks related to five themes could benefit from Chinese consumer spending, the BOA analysts said. Specifically, these are stocks that focus on the categories of health and wellness; affordable luxury; pragmatic goods and services; personal experiences and emotional value; as well as intellectual property. These 'new consumption' stocks display 'significant divergence in performance' amid softer market trends and sharply outperformed their peers in earnings growth and share prices, BOA analysts said. With clear value propositions – be it emotional value, functionality or affordability – these stocks are favoured over large-cap premium brands or market proxy players, they added. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Energy drinks, outdoor brands win on post-pandemic health, wellness focus An increased interest in health and wellness among Chinese consumers post Covid-19, has benefitted stocks focusing on these themes, BOA said. In the beverage market, energy drinks and soft drinks that focus on health and anxiety alleviation logged stronger sales growth compared to liquor or beer, the analysts noted. Outdoor brands including Amer Sports enjoyed nearly 40 per cent year-on-year growth compared to the overall domestic sportswear market, which logged sales growth only in the single-digit percentages. Online healthcare experienced 'rapid growth' fuelled by rising demand for proactive and preventive health management, and the increasing penetration of online drug purchasing. Affordable luxury gains amid deflationary environment Consumers tend to be price sensitive in deflationary environments. Within the passenger vehicle market, domestic brands nearly doubled their market share from 33 per cent in 2020 to 65 per cent in the first four months of 2025, thanks to better price-performance than European and Japanese brands, the report said. With improved product offerings, local brands in the smartphone market such as Xiaomi and Huawei have taken market share away from Apple. This trend towards affordability is reflected in travel, where short-haul and domestic trips via railways and budget airlines have been on the rise; and domestic, 'affordable luxury' hotel chains have wrestled market share away from global five-star hotels. Policy stimulus, subsidies boost demand for pragmatic items The analysts also observed an increased focus on the utility and functionality over brand names among consumers. Boosted by policy stimulus, sales for home appliances, furniture and consumer electronics rose by 20 to 25 per cent year-on-year for the first four months of 2025, outpacing overall retail sales growth, they noted. Mass market brands such as Geely, Leapmotor and XPeng are expected to outperform premium/luxury brands including Zeekr, Li Auto and Nio. Consumer willingness to spend on experiences The analysts noted that consumers are willing to invest time and money in experiences. Consumers are travelling more albeit spending less and treating themselves to 'small delights' such as new snacks, online games, cosmetics and pets. Companies such as Tencent and NetEase posted gaming revenue growth for Q1 2025. Meanwhile, Chinese snackmaker Yankershop reported 76 per cent year-on-year growth in 2024, significantly higher than that of the overall snack industry, thanks to its innovative konjac products. Co-branded products get boost from consumer spend on intellectual property BOA analysts highlighted that consumer spending on intellectual property-related goods and services – such as Labubu toys or domestic movies like Ne Zha – drives up sales for co-branded products. For instance, Pop Mart's retail sales rose by 165 to 170 per cent for Q1 of 2025, with China sales up by 95 to 100 per cent. The success of the animated movie Ne Zha 2, which contributed to around 60 per cent of China's Q1 2025 box office, also drove sales of co-branded products such as milk, teas and toys.
