US to Replace $4 Billion in Annual Israel Aid with Arms Sales Starting in 2027

The United States will stop providing $4 billion in annual aid to Israel beginning in 2027. Instead, the two nations will shift to a system where Israel purchases military hardware directly from the U.S.

President Donald Trump made the announcement on Tuesday during a phone interview with Fox News Channel. He stated that Israeli Prime Minister Benjamin Netanyahu had approached him with the idea. According to Trump, the two leaders have discussed the change for a couple of years.

Trump said the United States no longer needs to provide the funds as direct aid because Israel does not need the cash. He described the new arrangement as barter, where the U.S. provides military items and money in exchange for the purchase of American hardware. The president noted that the current aid package has become a frequent target for political criticism.

The move follows a long history of financial support between the two countries. In 2016, President Barack Obama signed a security agreement that allocated $38 billion to Israel over 10 years. That deal averaged $3.8 billion annually and required Israel to spend the majority of the funds on American military industries. Netanyahu has previously expressed a desire to reduce this dependency, telling The Economist in January that he wanted to taper off U.S. military aid within the next decade.

Reactions in Israel were mixed. Yair Golan, a leader in the opposition bloc and former deputy military chief, warned that ending the aid would deal a severe blow to Israel’s security. He stated in a written comment that the burden of funding defense needs would fall entirely on the Israeli public at a time when the country is fighting wars on multiple fronts. Netanyahu’s office did not immediately comment on the announcement.

The change also affects U.S. defense contractors. Currently, much of the aid is provided as foreign military financing, which requires Israel to spend the money on American-produced weaponry. This structure ensures the funds return to the U.S. economy. If Israel does not purchase the same amount of American materiel through the new sales model, U.S. contractors may see a financial impact. The shift also interacts with existing obligations under the Camp David peace accords with Egypt, which require the U.S. to support both Israel and Egypt with security assistance.

Financial data indicates the scale of recent support. A study published last year found that the U.S. provided at least $21.7 billion in military assistance to Israel after the start of the Gaza war in 2023. Another report from Brown University’s Watson School of International and Public Affairs estimated that the U.S. spent roughly $10 billion more on security aid and operations in the broader Middle East over the previous two years. These figures reflect the high costs of direct American involvement in the region during the conflict.