Trump ends annual aid to Israel

President Donald Trump announced on Tuesday that the United States will stop providing $4 billion in annual aid to Israel starting in 2027. Instead, the administration will move to a model where Israel purchases American military hardware directly. Trump described the change as a form of barter, replacing cash grants with a system of arms sales between the two countries.

The President made the announcement during a phone interview with Fox News Channel. This broadcast took place on Tuesday, which coincided with Election Day for the midterm elections. Trump stated that Israeli Prime Minister Benjamin Netanyahu had approached him with the idea. He noted that the two leaders had been discussing the potential change for a couple of years. Trump said the move is necessary because the United States spends a large amount of money on the aid, and he believes Israel no longer requires it.

The current aid structure stems from a security agreement signed in 2016 by former President Barack Obama. That deal provided Israel with $38 billion over a 10-year period, equaling $3.8 billion per year. The agreement required that the funds be spent on U.S. military industries, a rule that was being phased in to ensure the money returned to American contractors. Under the new plan, Israel will continue to buy American weapons, but through direct purchases rather than foreign military financing grants.

Trump pointed to political dynamics as a driver for the change. He said the $4 billion payment has become a talking point for Democratic candidates. He specifically named Abdul El-Sayed, a Senate candidate in Michigan, who is a vocal critic of Israel. Trump argued that the left uses the payment as a signal of unfairness. He said the target is too easy for opponents to attack, so he and Netanyahu agreed to alter the mechanism.

"You can consider it barter. You can consider military aid or cash," Trump said. "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."

Netanyahu has previously expressed a desire to reduce Israel's dependence on American aid. In an interview with The Economist published in January, he said he wanted to taper off U.S. military aid over the next 10 years. He described such a change as being in the works. Netanyahu's office did not provide immediate comment on the President's announcement.

The shift from aid to sales may impact U.S. defense contractors. Much of the current assistance is provided through foreign military financing, which ensures that the funds are spent on American-produced weaponry. If Israel buys the same amount of equipment through direct sales, the flow of money into the U.S. economy should remain similar. However, the accounting method changes, which could affect how the expenditure is reported.

The United States has provided tens of billions of dollars in military aid to Israel over the last few years. An academic study published last year estimated that the U.S. provided at least $21.7 billion in military assistance to Israel after the start of the Gaza war in 2023. That study was released on the second anniversary of the Oct. 7, 2023, Hamas attacks that sparked the conflict.

Another report by the Costs of War project at Brown University’s Watson School of International and Public Affairs found that the U.S. spent roughly $10 billion more on security aid and operations in the broader Middle East in the previous two years. These reports relied on open-source material to offer a comprehensive accounting of U.S. military aid and the costs of direct American involvement in the region.

The decision also interacts with existing obligations under the Camp David peace accords with Egypt. Those agreements require the United States to support both Israel and Egypt with security assistance. The new policy will determine how those commitments are met as the administration transitions from grants to arms sales.