Can Trump force the hand of NATO allies to spend up to 5% of GDP on defense?
U.S. President Donald Trump attends a meeting with NATO Secretary General Jens Stoltenberg ahead of the NATO summit in Watford, in London, Britain, December 3, 2019.
Kevin Lamarque | Reuters
As U.S. President Donald Trump looks to immediately fix his greatest political and economic bugbears, the thorny issue of NATO defense spending is likely to quickly return to the global fore.
Trump’s relationship with the Western military alliance was acrimonious during his first presidency, with the Republican leader frequently lambasting NATO member states for not abiding by a 2014 target to spend at least 2% of GDP on defense every year.
Ahead of his second term in office, Trump signaled that the debate over military spending — and Trump’s perception that NATO members are over-reliant on the U.S. for their own security — will be back on the agenda, stating that NATO’s 32 member countries should contribute even more toward defense.
“I think NATO should have 5% [of their GDP as a NATO contribution target],” he said in January. “They can all afford it, but they should be at 5%, not 2%”, he said at a press conference in which he also refused to rule out using military force to seize the Panama Canal or Greenland — a territory that belongs to NATO member Denmark.
There has been a broad increase in defense expenditure among NATO members since Trump was last in power. In 2018, at the height of the White House leader’s irritation with the military bloc, only six member states met even the 2% of GDP target.
By contrast, NATO data estimates that 23 members met the 2% target in 2024. While some surpassed that threshold — such as Poland, Estonia, the U.S., Latvia and Greece — major economic powers including Canada, Spain and Italy are among the laggards below the contribution threshold.
No NATO member has reached a 5% target suggested by Trump, including Washington under the administration of his predecessor Joe Biden.
Polish President Andrzej Duda fully supported Trump’s call for higher spending across NATO, telling CNBC on Wednesday that it was “paramount” that Europe returns to Cold War-era defense spending to defend against the likes of Russia and its expansionist foreign policy.
“If we want to defend against this – and us Poles decisively do – we’re spending close to 5% of GDP on defense this year. We’re aware that we have to modernize our armed forces, we have to be strong and provide a real deterrent to keep Russia aggression at bay,” he told CNBC’s Steve Sedgwick on Wednesday on the sidelines of the World Economic Forum in Davos, Switzerland.
Perhaps understandably, given that it borders war-torn Ukraine, Poland spends the highest proportion of its GDP on defense compared to other NATO members. The NATO 2024 estimates suggest Warsaw spent 4.12% of its GDP on defense last year.
New leader, old problems?
The Netherlands’ former Prime Minister Mark Rutte, now the secretary-general of NATO, is only a few months into his new job, but he has already repeatedly called on member states to increase defense spending.
His priority, however, is to get laggard countries to reach the 2% target, he said.
“Luckily, thanks to Trump in his first term, we have stepped up defense spending. … but we all have to get to the 2%,” he told CNBC’s Steve Sedgwick at the World Economic Forum in Davos on Thursday.
Countries that have still not reached the requisite target “have to get to 2% in the coming months. It has to be done this year,” noted Rutte, who has himself faced flak over why Dutch defense spending was below the NATO target for much of his time in office.
Outgoing Dutch Prime Minister Mark Rutte speaks to the media on the first day of the 2023 NATO Summit on July 11, 2023 in Vilnius, Lithuania.
Odd Andersen | Getty Images
Rutte said it was not impossible to increase defense contributions, flagging that European nations could afford to shave pensions, health and social security spending or increase taxation in order to boost defense expenditure.
“In the end, this is a rich place, in Europe we have [an] incredible amounts of wealth … so on defense spending, we can do this,” he said.
Pressing domestic spending priorities — as European nations face high food and energy costs — have constrained the ambitions of regional governments to increase the funding for defense and security, however.
Dutch Prime Minister Dick Schoof on Wednesday told CNBC that spending 5% of the national GDP on defense was a tall order.
“I think that’s going to be very, very difficult. And if I look at the effect of those kind of increases, that’s almost impossible. I think the discussion about defense spending should also be negotiated and discussed from a strategic viewpoint. [we must decide] where do we want to be with NATO … and then decide on what kind of money we will put in,” he told CNBC’s Dan Murphy.
Spending constraints
Sweden’s Finance Minister Elisabeth Svantesson noted that she had to weigh the desire for higher defense spending against the need for economic growth, which has been a challenge throughout much of Europe.
“It’s a very strong discussion about how much [should be spent on defense], whether 2% or 5% [of GDP]. But the question is, from my point of view, is that we have to do what we need to do to defend ourselves and have a strong NATO. But it’s also a question of growth,” she told CNBC’s Dan Murphy in Davos on Wednesday.
“I am the minister of finance … it depends on growth. First of all, we need growth in Europe, and then we need to know what we can do in terms of military spending,” she noted.
Sweden, which joined as NATO’s newest member in 2024, announced last year that it plans to increase defense spending to 2.4% of GDP in 2025 and 2.6% of economic output by 2028.
Svantesson said Trump’s perspective on a need for higher NATO-member defense spending was “fair, because we have to do more in Europe,” but argued that some member states were not even meeting the 2% target and that NATO countries “with greater and bigger economies than Sweden” needed to do more.
Spain is likely to become a target for Trump’s wrath. The European Commission forecast a 3% expansion for the country’s economy last year, but Spain put just 1.28% of its GDP toward security in 2024.
Spain’s Prime Minister Pedro Sanchez defended Madrid’s record, telling CNBC in Davos that the country has worked hard to increase its defense expenditure.
“Rest assured, Spain is very committed to achieving this goal of 2% of GDP on defense expenditure, but let me also say that, in the last 10 years, we have also increased by 70% our total defense expenditure,” he said Wednesday. “If we take those figures in absolute terms, what we can say is that Spain is the 10th top contributor to NATO.”
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-1441978130-f3b165f9a03b4c9e80d999a5d671ec66.jpg "Secrets to Saving Big: Coupon Tips Anyone Can Use")