Trump's Five Percent Doctrine and NATO Defense Spending

President Donald J. Trump is right to push US allies in the North Atlantic Treaty Organization (NATO) to do more for collective defense: The wolf is at the door in Ukraine. But his recent call for them to boost military spending to 5 percent of GDP may not be the best solution.

A cynic might suspect that Trump is making a demand with which he knows most European allies cannot or will not comply, providing him with a pretext for leaving the alliance. If that is his endgame, then Europe’s NATO members will need to sharply increase spending for their own defense—but on their own terms, not those of a US president whose commitment to international agreements is manifestly tenuous. Put differently, would hitting the 5 percent target make the US a more faithful ally? This is the fundamental question facing Europe and, by extension, all other US allies.

The US has been the world’s largest defense spender since the 1940s, tallying $880 billion in military spending in 2023[1] (3.36 percent of GDP), roughly double what China and Russia spent combined. NATO spent $1.28 trillion on defense in 2023, or about 54 percent of the global total (in constant dollars). Had all NATO members spent 5 percent of GDP on defense in 2023, their expenditures would have surpassed actual total global defense spending.[2] The US share of NATO’s expenditures would have shrunk from the actual 68.7 percent (see table 1) to 53.8 percent.

Hitting the 5 percent target would thus help address Trump’s long-held qualms about unequal burden sharing and presumably deter near-peer competitors—especially Russia—from further aggression in Europe. Of course, this would be the most partial—and naïve—of equilibrium outcomes. Increasing military spending to this extent would likely catalyze an arms race with those near-peer competitors. Or worse, it could create incentives for adversaries to strike before these expenditures are made.

For most countries, i.e., those that are not global superpowers pondering yet another occupation of Middle Eastern territory, the 5 percent spending target would clearly put them on war footing. In 2023, just nine countries spent 5 percent of GDP or more on defense: Algeria, Armenia, Israel, Lebanon, Oman, Russia, Saudi Arabia, and South Sudan. Most are or were at war. Five of these are authoritarian petrostates, unencumbered by competitive elections or the need to tax their populaces to fund this military largesse. North Korea and Eritrea, two totalitarian dictatorships, are not reported in the SIPRI data but likely vastly surpassed the threshold as well.[3] The US exceeded the 5 percent threshold for much of the Cold War and nearly hit it again during the global financial crisis, when GDP (the denominator) shrunk and the US was at war in Afghanistan and Iraq.

Two NATO members have already pledged to meet Trump’s 5 percent target: Estonia and Lithuania, small former Soviet republics that spent nearly five decades under Soviet occupation and share land borders with Russia. After Russia’s invasion of Ukraine, they did not need much encouraging. Kęstutis Budrys, Lithuania’s foreign minister, acknowledged as much: “Of course, there’s pressure, and it’s good and constructive pressure from our strategic and biggest ally in NATO.… We cannot ignore those messages. But it’s not the sole reason.… It is existential for us to have real war-fighting capabilities here.” The external policy anchor—the demand of their largest and most influential alliance partner—will probably be helpful in navigating their domestic politics. But with respect to front-line states like the Baltic republics, Trump is pushing on a wide-open door.

For NATO’s largest economies—France, Germany, and the UK—the incentives are murkier. The most clear and present danger contemporary Russia posed to Western Europe has already come to pass: the energy weapon. And at significant cost, Western Europe has begun indemnifying itself against Russia’s ability to use energy leverage in the future. Though certainly not entirely free from Russian hydrocarbons, Western Europe’s energy landscape is markedly less Russia-dependent than before—and surging Western hemisphere hydrocarbon exports and European green energy transitions are only making this shift easier.

France, Germany, and the UK all face significant economic headwinds in the form of anemic growth and budget deficits. Increasing military spending to 5 percent of GDP could help provide economic stimulus—European arms manufacturers seem to think so. But if the additional spending goes to US firms, something both Trump and his predecessor Joe Biden have promoted, the domestic stimulus effects of increased European military spending would be attenuated.

Taking Trump seriously, not literally, the 5 percent target may be notional and a signal that Europe (and Canada) need to be doing more to ensure the readiness and robustness of the alliance. I agree. NATO shouldbe doing more in terms of defense. But spending under duress and on capital-intensive US weapons systems, satisfying Trump’s desire to reduce US trade deficits—is not obviously the right way to go. The war in Ukraine has provided many lessons, including that conventional military might—air superiority fighters, naval cruisers, and tanks— can be counterbalanced by smaller forces using asymmetric tactics and combining some conventional capabilities with comparatively inexpensive, civilian tech-based drones.

This line of reasoning is part of NATO Secretary General Mark Rutte’s more modest proposal that European NATO members may need to increase spending to around 3.7 percent of GDP or “start learning Russian,” and these efforts should focus on more economical approaches to defensive capacity building. Unlike the US, the other members of NATO are not particularly concerned about the ability (or lack thereof) to sustain combat operations in multiple world regions far from their homelands.[4]

Trump’s 5 percent target might make for good politics and line the pockets of arms manufacturers in the US and abroad, but smart NATO defense means investing in resilience, not just ramping up spending to satisfy US demands.

Notes

1. The most recent year for which comprehensive, global data are available, per SIPRI. Expenditures are in constant 2022 US dollars.

2. Whether this translates to a preponderance of capabilities is a deceptively complex question to answer. Two-thirds of NATO’s members—including the heavy hitters, like the US, UK, France, and Germany, have all-volunteer armed forces, so their wages and benefits must compete with prevailing wages in advanced, high-income economies. The very nature of their tasks makes calculating whether these higher wages are offset by higher productivity difficult. The same is generally true of expenditures on arms and technology, especially as the Ukraine war has demonstrated the utility of less-expensive, off-the-shelf civilian technologies like drones.

3. State media put North Korean defense spending at 16 percent, though recent CIA estimates put the figure between 20 and 30 percent.

4. The UK and France still have more global interests owing to their patchwork of protectorates and, in the case of France, a history of interventions in Francophone Africa and the Asia-Pacific, most recently in New Caledonia.