In 1979, NATO placed long-range missiles in Europe. This threatened the USSR. In 1983, US President Reagan announced the Strategic Defence Initiative (SDI).
The idea was to create a laser defence shield to protect the USA from nuclear attack. The USSR assumed the USA were looking for ‘First Strike’ capability. The Soviets did not have the finances or the expertise to match America's plans.
The Russian economy was struggling severely. They could not commit the expenditure necessary to maintain the arms race.
Living standards in the USSR were falling, while in the West they were rising rapidly. Consumer goods were of a much poorer standard as industrial production lagged behind the West.
Gorbachev wanted to modernise the USSR and improve relations with the USA. Realising the Soviets could no longer compete in the arms race if Russia was to be modernised, he looked for ways to end military competition and reduce tensions between the superpowers.