The leaders of NATO member states have agreed with Donald Trump's proposal to raise military spending to 5% of GDP, aiming to reach this target by 2035.
During his first presidential term, Trump managed to push NATO countries to increase their military spending to 2% of GDP. Despite ideological differences, the Biden administration did not reverse Trump’s decision, demonstrating continuity on this issue. As a result, by the end of 2024, only 8 out of 32 NATO member countries had failed to meet the 2% benchmark. These are Spain (1.24%), Belgium (1.29%), Luxembourg (1.3%), Slovenia (1.37%), Canada (1.45%), Portugal (1.46%), Italy (1.5%), and Croatia (1.86%). Meanwhile, 6 countries exceeded the 2% target, and Poland became a leader, allocating a record 4.07% of its GDP to defense.
Trump believes that maintaining the 2% level is “terrible” and demands a 5% target. But these 5% come with caveats: 1.5% can be spent on infrastructure or cybersecurity. Therefore, the "pure" military spending by 2035 should amount to 3.5%, while the remaining 1.5% can go towards bridges, roads, ports, airfields, or communications.
Let’s assume that both Washington and Berlin are determined to reach the 3.5% mark. The U.S. can handle this relatively easily — a bit more spending won’t change much, and an additional trillion dollars of national debt won’t significantly alter the overall picture. But it will be much harder for European countries. Still, reaching 3.5% is theoretically possible through:
1. Organic GDP and state revenue growth;
2. Increased public debt;
3. Budget reallocation;
4. Accounting tricks.
However, if Germany aimed to hit 3.5% in pure defense spending by next year, it would have to increase its federal defense budget from the current €90.5 billion to €162.7 billion — or 34.18% of the federal budget. For context: Germany is already struggling with €90.5 billion in defense spending, and its 2024 federal budget deficit exceeds €118.8 billion.
Stretching this spending increase over 10 years would make it more manageable and less shocking. But whether the German economy will grow — or even stagnate — over the next decade is unclear, as global competition becomes increasingly tough for German industry. Notably, since Q3 2023, Germany’s GDP has been shrinking. To stimulate growth, Germany would need cheap energy and a dismantling of China’s high-tech industry. Both seem unrealistic.
The most realistic path to the desired spending levels would be to cut social spending and convince the public of the necessity of increased military expenditures. In response, the public is likely to deliver unpredictable election outcomes. In simple terms, political crises in EU countries will become the norm, and their regimes will steadily evolve into “democratorships” — authoritarian states with democratic slogans.
And this only concerns quantitative indicators. There are also qualitative ones — the cost and production value of weapons, their technical specifications, and the ownership structure of the defense industry.
It’s important to note that a 1.5x increase in military spending does not mean that the number of weapons systems will also grow by 1.5x.
First, both the U.S. and the EU have depleted their arsenals.
Second, the current war has shown that as stockpiles are exhausted, the cost of each individual item (especially ammunition) rises. This is classic market behavior: increased demand with stable supply leads to price growth. Therefore, defense contractors will have no problem absorbing an additional 1.5% in pure military spending — they just need to justify the price hikes.
Third, the structure of the Western defense industry hasn’t changed. It remains the domain of publicly traded companies whose managers care more about financial metrics than output volumes. To them, market capitalization matters more than the ability to produce more shells and vehicles at lower costs. This applies both to the U.S. and Europe. Truly changing the management philosophy of defense enterprises would require nationalization — something virtually impossible. In the U.S., it’s common for officials to alternate between working for corporations and the federal government. Even Trump cannot change that — this is an even deeper layer of the "deep state" than Washington bureaucracy.
Meanwhile, the European defense industry is scattered across dozens of countries and managed at the national level, while overarching goals are set by supranational bodies (NATO, the European Commission). This complicates coordination and rearmament. There’s no need to elaborate on problems with personnel, technology, and building new factories — it’s already obvious.
Thus, NATO countries will find it extremely difficult to honestly reach the 3.5% pure defense spending goal. It will require increasing debt, slashing social programs, and endlessly manipulating statistics. Eight out of 32 countries still haven’t reached the 2% mark — largely because they don’t feel threatened (Spain, for example, is far from Russia). At 3.5%, the number of countries resisting the target will grow. As for 5%, it’s hardly worth discussing. Moreover, quantity does not equal quality, and increased spending does not guarantee lower unit costs.
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