NATO Defense Spending: A New Landscape Emerges
As NATO leaders convene under the principle of collective defense, a longstanding narrative from Washington persists: the United States bears the brunt of the alliance's military burden. In absolute financial terms, this claim holds weight. The US allocated approximately $980 billion to defense last year, accounting for around 62% of NATO's total expenditure. However, when evaluated as a proportion of national wealth, a different and more nuanced picture comes into focus.
GDP-Based Spending: Eastern Europe Takes the Lead
According to NATO projections for 2025, the United States does not lead in defense spending relative to GDP. That honor goes to Poland, which is forecast to dedicate 4.48% of its economic output to defense. Following closely are Lithuania at 4%, Latvia at 3.73%, and Estonia at 3.38%. Nations like Norway and Denmark also exceed the 3% mark, while the United States stands at 3.22%.
This contrast underscores a central tension within the 32-member alliance. While Washington remains the indispensable military superpower, several frontline European states now commit a larger share of their national income to defense. For countries bordering Russia or proximate to the conflict in Ukraine, the threat is immediate and existential. In contrast, the US, with a GDP surpassing that of all other NATO members combined, manages global commitments that extend far beyond Europe.
NATO's Evolving Benchmarks and Commitments
Historically, NATO's benchmark required members to spend 2% of GDP on defense. By 2025, every ally has met or surpassed this threshold, including Spain, which had long faced criticism for lagging behind. Leaders have now set a more ambitious goal: to invest 5% of GDP annually on defense and security-related spending by 2035. This includes 3.5% allocated to core defense and up to 1.5% for infrastructure, cyber resilience, and civil preparedness.
Eastern Europe's Defense Spending Surge
The nations spending most heavily relative to GDP are predominantly in Eastern and Northern Europe. Poland has been at the forefront for several years, making significant investments in drones, artillery, and fighter aircraft. It has diversified its suppliers, procuring systems from South Korea as well as the US, to expedite deliveries.
The Baltic states—Lithuania, Latvia, and Estonia—have adopted what officials term a porcupine strategy: deploying small, mobile, and lethal systems designed to deter or blunt a larger Russian force. All three aim to approach or reach 5% of GDP in the coming years.
Even traditionally cautious spenders have shifted their posture. Germany crossed the 2% mark for the first time since 1990, driven by what former Chancellor Olaf Scholz called a Zeitenwende—a historic turning point. Sweden, which joined NATO in 2024, has rapidly increased its defense allocations, while Finland has moved well beyond its pre-accession levels.
Conversely, several southern and western European countries have only recently reached the 2% baseline. Italy, Belgium, and Spain have encountered domestic political resistance and fiscal constraints. Canada, too, has historically underinvested relative to its size, though it has pledged to accelerate spending.
America's Weight and Europe's Evolving Response
Despite these shifts, the United States remains the financial and military anchor of NATO. Its defense budget, though declining from 3.6% of GDP in 2020 to an estimated 3.2% in 2025, dwarfs all others in absolute terms. It also underwrites critical capabilities—from nuclear deterrence to global logistics—that European allies cannot yet replicate.
Nevertheless, the political climate is evolving. At the Munich Security Conference, European leaders openly acknowledged the necessity for a stronger European pillar within NATO. German Chancellor Friedrich Merz argued that membership is not only Europe's competitive advantage but also that of the United States. French President Emmanuel Macron urged Europe to accelerate and deliver all components of geopolitical power.
American officials have welcomed this trend. Undersecretary of Defense Elbridge Colby stated that Washington desires vigorous, capable, and more self-reliant European allies, noting that the US has long borne a vastly disproportionate share of the burden.
The alliance's own budget—approximately €5.3 billion for 2026—is modest by comparison, with the US and Germany each contributing about 15%, and the UK and France roughly 10%. Even here, Washington's share has decreased from more than 22% under a revised formula agreed upon in 2019.
