US President Donald Trump attends a meeting with NATO Secretary General Jens Stoltenberg ahead of the Watford NATO summit in London, UK, December 3, 2019.
Kevin Lamarque | Reuters
As U.S. President Donald Trump looks to immediately correct his biggest political and economic mistakes, the thorny issue of NATO defense spending is likely to quickly return to the global agenda.
Trump's relationship with the Western military alliance was acrimonious during his first presidency, with the Republican leader frequently criticizing NATO member states for failing to meet a 2014 goal of spending at least 2% of GDP on defense each year.
Ahead of his second term, Trump signaled that the military spending debate – and Trump's belief that NATO members are overly dependent on the United States for their security – would be back on the agenda, stating that the 32 NATO member states should contribute even more towards defense.
“I think NATO should have 5% (of its GDP as NATO's target contribution)” – he said in January. “Everyone can afford it, but it should be 5%, not 2%,” he said at a press conference where he also refused to rule out the use of military force to seize the Panama Canal or Greenland — territory belonging to Denmark, a NATO member.
Since Trump took office, there has been a significant increase in defense spending among NATO members. In 2018, at the height of the White House leader's exasperation with the military bloc, only six member states even achieved the 2% GDP target.
In contrast, NATO data estimates that 23 members have achieved the 2% target. in 2024. While some have exceeded this threshold – such as Poland, Estonia, the US, Latvia and Greece – major economic powers, including Canada, Spain and Italy, are among the laggards in reaching the contribution threshold.
No NATO member, including Washington under his predecessor Joe Biden, has met the 5% target suggested by Trump.
Polish President Andrzej Duda fully supported Trump's call for increased spending across NATO, telling CNBC on Wednesday that he would “it is paramount” that Europe returns to Cold War-era defense spending defend ourselves against Russia and its expansionist foreign policy.
“If we want to defend ourselves against this – and we, Poles, definitely do – we will spend nearly 5% on defense this year. GDP. “We know we have to modernize our armed forces, we have to be strong and provide the state with a real deterrent to keep Russian 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 largest share of its GDP on defense compared to other NATO members. NATO estimates 2024 suggest that last year Warsaw spent 4.12% of its GDP on defense.
New leader, old problems?
Former Dutch Prime Minister Mark Rutte, currently Secretary General of NATO, has only been starting his new position for a few months, but he has already repeatedly called on member states to increase defense spending.
His priority, however, is to get lagging countries to meet the 2% target, he said.
“Thankfully, thanks to Trump, we increased defense spending during his first term. … but we all have to get to 2%,” he told CNBC's Steve Sedgwick at the World Economic Forum in Davos on Thursday.
Countries that have still not achieved the required target “must reach the 2% level in the coming months. It should be done this year,” noted Rutte, who has himself faced criticism over why Dutch defense spending has long been below NATO's target during his time in office.
Outgoing Dutch Prime Minister Mark Rutte addresses the media on the first day of the 2023 NATO Summit, July 11, 2023, in Vilnius, Lithuania.
Strange Andersen | Getty Images
Rutte said it was not impossible to increase defense contributions, noting that European nations could afford to cut spending on pensions, health and social security or increase taxes to increase defense spending.
“After all, it's a rich place, we have (un)incredible amounts of wealth in Europe… so we can do it in terms of defense spending,” he said.
However, pressing domestic spending priorities – as European nations struggle with high food and energy costs – have limited regional governments' ambitions to increase defense and security resources.
Dutch Prime Minister Dick Schoof told CNBC on Wednesday that spending 5% of the country's GDP on defense is a big challenge.
“I think it will be very, very difficult. And if I look at the impact of these kinds of increases, it's almost impossible. I believe that the discussion on defense spending should also be negotiated and discussed from a strategic point of view. (We have to decide) where we want to be in NATO… and then decide what kind of money we're going to put in,” he told CNBC's Dan Murphy.
Spending limits
Swedish Finance Minister Elisabeth Svantesson noted that she must weigh the desire to increase defense spending with the need for economic growth, a challenge in much of Europe.
“It's a very sharp debate about how much (should be spent on defense), whether 2 or 5% (of GDP). But from my point of view, the question is whether we have to do our part 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 finance minister… 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 NATO as the newest member in 2024, announced last year that it planned to increase defense spending to 2.4% of GDP in 2025 and 2.6% of economic output by 2028.
Svantesson said Trump's view of the need for higher defense spending by NATO members is “fair because we need to do more in Europe,” but argued that some member states have not even met the 2% target and that NATO countries “that have bigger and bigger bigger economy than Sweden” had to do more.
Spain will likely be the target of Trump's ire. European Commission forecasts growth of 3%. for the country's economy last year, but in 2024 Spain allocated only 1.28% of its GDP to security.
Spanish Prime Minister Pedro Sanchez defended Madrid's recordtelling CNBC in Davos that the country was working hard to increase its defense spending.
“Rest assured that Spain is very committed to achieving the goal of 2% of GDP on defense spending, but let me also say that over the last 10 years we have also increased our total defense spending by 70%,” he said in Wednesday. “If we take these numbers in absolute terms, we can say that Spain is 10thvol most important contribution to NATO.”