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Pentagon’s 2026 strategy pivots to flexible realism and warrior spirit to counter China

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The US Department of Defense has released its 2026 National Defense Strategy (NDS), outlining a pivotal shift toward “flexible realism”—a doctrine that prioritizes the protection of American interests over global “nation-building” projects.

According to the NDS, this approach is anchored by a “Trump Addendum to the Monroe Doctrine,” which prioritizes the security of the US homeland and maintains dominance over the Western Hemisphere. This document follows and reinforces the broader US National Security Strategy (NSS).

The strategy identifies China as the “primary rival” and issues a blunt demand to allies and partners: they must significantly increase their financial contributions, targeting a new spending standard of 5% of their Gross Domestic Product (GDP).

Through a “national industrial mobilization” and the “revival of the warrior spirit,” the NDS aims to deter adversaries such as Russia, Iran, and North Korea. Ultimately, the strategy seeks to achieve global stability by rebalancing military responsibilities and focusing on pragmatic security rather than idealistic foreign interventions.

America First: Rejection of “utopian idealism”

The 2026 National Defense Strategy defines “flexible realism” as a clear-eyed, common-sense approach to national security that prioritizes American interests over abstract global ideals.

Flexible realism rejects the “grand strategies” of previous administrations that conflated American interests with those of the entire world or sought to “solve all the world’s problems.” Instead, it focuses on “real, credible threats to the safety, liberty, and prosperity of Americans,” acknowledging that threats to the US homeland are more visceral and significant than those in distant regions.

The NDS explicitly contrasts flexible realism with “castles in the clouds” abstractions like “utopian idealism” and the “rules-based international order.” It declares an end to goals such as regime change, “endless wars,” and “grand nation-building projects,” replacing them with a “hard-headed realism” designed to achieve a “noble and proud peace.”

According to the Pentagon, this approach requires a pragmatic correlation between resources and objectives. The NDS acknowledges that the US “cannot act everywhere alone” and cannot solve every global problem; it calls for the military to “evaluate, rank, and prioritize” threats based on their severity.

In practice, flexible realism aims for a “resilient and sustainable balance of power” rather than total global hegemony. Regarding China, for instance, the strategy seeks a “reasonable peace” and a balance of power that prevents Chinese dominance over the US, explicitly stating that this goal does not require “regime change or another existential struggle.”

The document contends that this approach “does not mean isolationism.” On the contrary, it envisions a “focused and truly strategic approach” where the US acts globally to advance its practical interests—particularly alongside allies—while insisting that those allies shoulder the primary burden of their own regional defense.

Burden sharing and defense spending

The NDS fundamentally redefines global burden-sharing, shifting alliances from a model subsidized by the US to one of “clear accountability” and self-sufficiency. It argues that allies must cease acting as “dependents” and instead function as true partners.

This “America First” approach asserts that by prioritizing US interests and demanding that allies take primary responsibility for their own security in most theaters, the US can concentrate its resources on defending the homeland and deterring China.

In this context, the strategy redefines requirements through specific financial targets, operational changes, and strategic ultimatums. These include a new global financial standard, “primary responsibility” for allies where the US acts as a supporter rather than a lead, and the prioritization of “model allies.”

For example, the US will now look to delegate the Ukraine issue to Europe, the tensions on the Korean Peninsula to South Korea, and the management of Iranian aggression in the Middle East to Israel and Gulf allies.

By compelling allies to act, the Pentagon aims to focus the US military on its two highest priorities: defending the US and deterring China in the Indo-Pacific.

The primary strategic rival: China

The NDS describes one of the “most dangerous” security environments in the nation’s history, where adversaries have grown increasingly powerful because the US failed to maintain its advantages.

Major geopolitical threats are categorized not only by state actors but also by their geographical proximity to the American homeland and the systemic risk of simultaneous conflicts.

The strategy identifies the People’s Republic of China (PRC) as the primary strategic rival. The NDS describes the PRC as “the most powerful state we have faced since the 19th century,” asserting it ranks second only to the US on a global scale.

The threat from China is defined by the “pace, scale, and quality” of its military forces, which include capabilities capable of striking targets far beyond the Western Pacific.

The Pentagon points out that the fundamental danger is not merely military, but China’s potential to dominate the Indo-Pacific region. There is significant concern that such dominance would effectively control American access to the “world’s economic center of gravity.”

Accordingly, the US goal is to maintain a balance of power to prevent China from dominating the US or its allies, seeking a “reasonable peace” rather than pursuing regime change.

The NDS approach to China is summarized as “deterring China in the Indo-Pacific through strength, not conflict.” Rather than seeking confrontation or isolation, the strategy envisions a dual approach: building robust military deterrence (“strength”) as a prerequisite for effective diplomatic and military engagement.

The document explicitly states that the US goal is not to “dominate China” or to “strangle or humiliate” it. Instead, the US will seek a “reasonable peace” characterized by a balance of power where no country can dominate another.

A message to Europe: Provide your own security

The 2026 National Defense Strategy fundamentally redefines Europe’s role from a region dependent on American security guarantees to one that assumes “primary responsibility” for its own conventional defense.

The strategy makes it clear that NATO allies must transition to taking the lead in defending the continent, while the United States provides “critical but more limited support.”

This shift is based on the assessment that Russia is a “persistent but manageable threat” and that the collective economic and military power of NATO members in Europe “dwarfs” that of Russia. The document notes that the German economy alone far outstrips Russia’s.

Consequently, the NDS argues that Russia is “not in a position to attempt European hegemony,” meaning Europe is capable of managing the threat without US dominance.

Europe serves as the testing ground for the White House’s new “global standard” for burden-sharing. The strategy references a “Hague Summit” where NATO allies are expected to set a total defense spending target of 5% of GDP. While the Pentagon emphasizes it will “provide incentives and opportunities” for allies to meet these targets, it insists these commitments must be fulfilled.

While stating that the war in Ukraine “must end,” the document places the responsibility for supporting Ukraine’s defense and maintaining the subsequent peace directly on European allies.

Declaring this to be “primarily Europe’s responsibility,” the document rejects the previous administration’s approach, which it claims allowed allies to engage in “free-riding.”

To help NATO allies generate the forces necessary for their own defense, the strategy envisions expanding transatlantic defense industrial cooperation and reducing trade barriers.

The “Model Ally”: A primary role for Israel in the region

Under the 2026 National Defense Strategy, Israel is identified as the “model ally” and serves as the primary example of the “America First” approach to burden-sharing.

The strategy redefines the US relationship with Israel based on the principle that allies must have the will and capability to defend themselves, with the US providing “critical but limited support.”

According to the Pentagon, Israel fits the definition of a “model ally” because, particularly following the October 7 attacks, it has proven it possesses the “capability and willingness to defend itself.”

Unlike allies criticized as “dependents,” the document praises Israel for taking action for its own survival. Consequently, the strategy states that the US should “empower” Israel rather than “tie its hands.”

Consistent with the strategy’s broader push for regional burden-sharing, Israel is expected to assume “primary responsibility for deterring and defending against Iran and its proxies.”

The document contends that Israel’s operations have “severely weakened” Iranian proxies, specifically Hezbollah and Hamas.

Israel’s role extends to stabilizing the regional security architecture. Building explicitly on the Abraham Accords, the Pentagon intends to “achieve integration between Israel and our Arab Gulf partners.” This effort aims to create a coalition where regional partners collectively exert more effort to defend themselves, allowing the US to focus its primary attention on the Indo-Pacific and its own borders.

While Israel leads the fight, the US commits to “strongly supporting Israel’s self-defense efforts.” This support is characterized as “critical but limited”: the US will provide the tools and support necessary for Israel to succeed (such as arms sales and intelligence sharing) but will not assume the primary combat role on the ground.

Instructions to the Gulf: “Integration with Israel”

According to the 2026 National Defense Strategy, a successful transformation of the region is defined by the establishment of a “more peaceful and prosperous Middle East” achieved through local ownership rather than American intervention.

The Pentagon argues that this transformation cannot be imposed from the outside. According to the US, it can only be realized by “those with the greatest stake in the region’s future”—the regional nations themselves.

Success is defined by regional allies and partners assuming “primary responsibility for deterring and defending against Iran and its proxies.” The US role shifts from leading the struggle to a supportive one.

According to the NDS, a successful transformation requires “deepening cooperation and integration” between Israel and Arab American partners, explicitly based on the framework of the Abraham Accords.

Defense industry linked to Trumpist economic policies

The NDS describes its industrial mobilization plan as a “national mobilization” and an “industrial call to arms,” likening it to the industrial revivals of the World Wars and the Cold War.

The plan aims to “strengthen the US Defense Industrial Base (DIB)” to support the President’s claim of a “once-in-a-century revival of American industry.”

This includes the re-establishment of a “world-class arsenal”; modernization and deregulation; the adoption of AI and innovation; internal reform of the Pentagon to increase production capacity; the expansion of the supplier base; and deepening integration with allies.

Preparing the military for war

The document defines the “warrior spirit” as the “heart of the US military”—a set of values exemplified by American heroes such as World War II veterans.

According to the document, the “warrior spirit” is inextricably linked to the military’s “fundamental, irreplaceable role.” Reviving this spirit is presented as necessary for the American military to refocus on “decisively winning the nation’s wars.”

This entails moving away from what the document describes as distractions, such as “social engineering” or “nation-building.”

The core premise of the strategy is the claim that previous administrations neglected and often “actively undermined” this spirit.

The document argues that true deterrence is a byproduct of a military focused on lethal force and victory, rather than abstract concepts like “grand nation-building projects” or the “rules-based international order.”

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US wealthy demolish multimillion-dollar mansions for land

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Wealthy buyers in the US are tearing down multimillion-dollar homes shortly after purchasing them for hundreds of millions of dollars.

According to a report by The Wall Street Journal, the trend is driven by a shortage of land in prestigious locations, particularly along coastlines.

For ultra-wealthy buyers, the prime factor has become the land’s location rather than the structure standing on it. After the acquired properties are flattened, newer, more modern homes are built on the cleared lots.

Drawing attention to the shift in the luxury real estate market, the report noted:

“The home itself, formerly the primary driver of an expensive real estate purchase, is now almost beside the point. Buyers are competing first and foremost for well-located land, situated on the ocean or a mountaintop.”

The newspaper cited moves by US billionaire William Lauder as an example. Lauder purchased the oceanfront estate of radio host Rush Limbaugh, who died in March 2023, for $155 million and had it completely demolished in July.

Lauder had previously torn down two homes situated on roughly 1.2 hectares of land along the Palm Beach coast. Having initially planned to construct his own residence on the parcel, Lauder subsequently sold the cleared plot for approximately $200 million.

Jonathan Miller, a real estate appraiser, stated that such transactions are becoming increasingly common as land prices rise.

Amid this momentum, estate agents have also begun marketing luxury homes directly as teardown lots.

Listings use artificial intelligence-generated imagery to showcase how the land would look without the structures on it.

Marketers avoid using the word “demolition” directly, resorting instead to terms such as “adaptive reuse”.

Teardown listings rise across luxury housing market

The trend is not confined to the coast and is spreading to other regions across the US.

Data from property brokerage Redfin reveals that references to demolishing buildings are becoming more frequent in sales listings.

The share of such listings exceeds 15% in the Bunker Hill Village area of Houston, while standing at 6.67% in Pimmit Hills, Virginia.

Dina Goldenteyer, a real estate agent working in Miami, remarked that serial demolitions have become more frequent because buyers no longer appreciate homes older than a decade.

Former retail executives Jamie Dooley and Christine Scott spent $3.7 million in 2020 to demolish a seaside home near Destin, Florida.

Although the couple spent five years building a modern home on the cleared site, they listed the resulting new structure with a demolition condition, citing the fact that no one wanted to buy the property as it stood.

William Paddock, an employee at the environmental consultancy WAP Sustainability, pointed to the environmental damage caused by this construction cycle.

Paddock emphasized that tearing down a home of roughly 1,000 square metres and replacing it with a new building of approximately 2,700 square metres generates a carbon footprint equivalent to the annual emissions of an average 250 American households.

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US inflation reaches 3.7% as midterm election campaign intensifies

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An uptick in September inflation as the US midterm elections approach has pushed the cost-of-living debate back to the centre of the agenda for Democrats seeking to regain control of Congress from Republicans.

Annual inflation stood at 3.7% in September, according to the Consumer Price Index published by the Bureau of Labour Statistics, with energy, petrol, and electricity costs rising on a monthly basis.

Food prices remained flat from August to September, recording a 2.5% increase compared with the same period last year.

Democrats are anchoring their election campaigns to pledges of easing the cost of living, blaming the price increases on President Donald Trump’s tariffs and the war with Iran.

Trump and Republicans, pointing to the numerous left-wing candidates who won primary elections this year, contend that the opposition has become captive to “communists” within the party.

When annual inflation stood at 2.4% in February, the US and Israel launched the Iran war on the final day of that month, and prices continued to climb throughout the conflict.

The recent acceleration has not entirely reversed the retreat from the 40-year peak of 9.1% recorded in June 2022; however, the rate has remained above the Federal Reserve’s 2% target for over five years.

Fed policymakers raised the benchmark interest rate by a quarter of a percentage point last month, citing the battle against stubborn inflation. Officials will convene again next week to consider whether to raise rates or hold them within the 3.75% to 4% target range.

Energy and fuel record sharpest increase since first month of war

In September, energy prices posted their largest monthly jump since March, the first full month of the war with Iran, climbing 20.4% year-on-year. Energy costs had risen 2.1% from July to August, after falling 1.5% from June to July and 5.7% from May to June.

Recent escalations in Iranian attacks on oil tankers in the Strait of Hormuz, alongside more frequent strikes by Ukrainian forces against Russian refineries, have strained global crude oil and refined product markets, driving up US petrol and diesel prices.

Petrol prices also recorded their sharpest monthly increase since the first month of the war, climbing 9.1% from August to September, bringing the annual increase to 35.3%.

American Automobile Association (AAA) data shows the average price of regular petrol across the US stands at $4.26 per gallon; while below the level of roughly $4.48 recorded a month ago, it remains more than $1.20 higher than a year earlier. Average gallon prices exceed $6 in California and $5 in both Washington state and Nevada.

Electricity prices rose 0.2% from August to September, offsetting the 0.2% decline between July and August, and were up 4.4% year-on-year.

Heavy power demand from new data centres is feeding through into local household electricity bills. Trump argued that companies must cover the cost of the electricity required by their data centres themselves.

In a post on Truth Social, Trump claimed that he was requiring large data centres to generate their own power and feed the surplus back into the local grid, suggesting this could bring about “a major drop” in electricity prices.

Used vehicle market posts monthly rise as food costs stabilise

The cost of food at home fell 0.1% month-on-month in September, while dining out increased 0.2%.

Egg prices dropped to $2.27 a dozen, falling roughly 35% compared with September 2025 and remaining well below the 20-year peak of $6.23 recorded in March 2025.

Ground beef prices rose roughly 2.4% compared with September 2025, but at $6.48 a pound, they remained below the 20-year high of $6.98 reached in June.

Chicken held steady at its year-earlier level of $2.06 per pound last month, having fluctuated between $2.01 and $2.09 since November 2024.

Used car and truck prices fell 1.5% compared with September 2025, but rose 0.7% month-on-month in September following 0.4% increases in both July and August.

Heather Long, chief economist at Navy Federal Credit Union, noted that the sector faces severe pressure stemming from a combination of expensive replacement parts and a shortage of skilled labour.

Speaking to The Hill, Long emphasised that every cost pressure across the market is being felt directly at local auto repair shops.

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Anthropic posts $80.7bn loss ahead of IPO as computing costs soar

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Anthropic, developer of the artificial intelligence model Claude, reported a net loss of $80.7 billion for the first six months of 2026 ending 30 June.

According to a report by The Wall Street Journal citing the company’s draft initial public offering prospectus, this recorded loss nearly doubled the $42 billion loss incurred across the entirety of 2025.

The vast majority of that enormous figure, accounting for $72 billion, stemmed from accounting-driven book-value write-downs.

In contrast, the company saw a sharp surge in revenue, with turnover in the first half of the year climbing to $16.3 billion from $1.1 billion in the same period of the prior year.

During this period, Anthropic spent approximately $9 billion on computing power and infrastructure needs, surpassing in just six months the $7.3 billion spent across the whole of 2025.

The company has commitments to pay roughly $450 billion over the next seven to 10 years under cloud service contracts.

Under these obligations, contracts are planned for $111 billion with Google Cloud, $110 billion with Amazon Web Services, and $31 billion with Microsoft.

Anthropic will also spend up to $86 billion by 2033 and 2034, respectively, to lease Nvidia chips through smaller AI-focused cloud providers Nscale and Lambda.

The company could spend an additional $750 billion in the coming years to expand its computing capacity.

Roughly a third of the draft IPO prospectus was dedicated directly to risk factors.

The document highlighted the possibility that models could cause tangible real-world harm, noting that artificial intelligence could exhibit a “self-preservation” tendency and produce responses resembling “blackmail”.

Anthropic warned that the scale of damage caused by an AI-driven “catastrophic event” could render insuring against such risks impossible.

According to market expectations, Anthropic’s IPO could rank among the largest transactions in history, potentially surpassing SpaceX’s record.

Following the market debut, the company’s market valuation is projected to reach up to $2 trillion.

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