Understanding NATO’s Burden-Sharing Debate: Political Rhetoric and Defense Spending Realities
The famed Prussian strategist, Carl von Clausewitz, argued that war is a tool for achieving political goals, and alliances, as an extension of war, similarly seeks to achieve political objectives through cooperative relations. Like all heads of state, President Donald Trump evaluates his nation’s alliance commitments, weighing the cost against the political objectives gained. Despite the North Atlantic Treaty Organization (NATO) being the bedrock of American foreign policy for nearly 76 years, it is under increased scrutiny.
During his first term and since returning to the White House, President Trump has consistently stated the United States provides a disproportionate amount of financial support to NATO and stresses the need for European allies and Canada to increase their contributions. Amidst the complexities of NATO funding, exacerbated by political rhetoric, the United States’ disproportionate contribution to the alliance is a calculated investment that advances American interests, while also preserving its global hegemony. The President’s critiques of current funding dynamics likely reflect an effort to realign the terms of this investment and secure a more favorable position for the United States.
To avoid getting lost in the rhetoric, it is essential to understand where President Trump stands on this issue and the fundamentals of NATO to gain perspective on the burden-sharing debate. This debate centers on America’s disparate spending supporting collective defense, raising concerns about allied free-riding. While the U.S. allocates substantially more towards NATO’s collective defense, a broader look at NATO’s funding, including non-defense contributions, shows that the burden-sharing debate is misleading; it overlooks the diverse expenditures that advance NATO’s objectives and ensures trans-Atlantic stability. Moreover, the U.S. benefits significantly from its leadership role, and recent progress by NATO members in increasing their defense contributions further erodes the argument of unequal burden.
The Political Rhetoric of NATO
Every American administration has criticized Europe’s investments in collective defense; President Trump has amplified these issues. During his first term, he focused on the “unfairness” of the United States paying the most for NATO’s collective defense, arguing it was nearly 90% and repeated claims that members were “delinquent” on payments. He asserted that these nations “owed” NATO and the United States billions of dollars and that they should settle the balance for the years they underspent on their defense. He later concluded that, unlike previous administrations, his approach reversed the multi-year trend of members under-contributing to the alliance’s collective defense.
The rhetoric persisted throughout his 2024 campaign and into his second term. While campaigning, he asserted that only nations paying their fair share and meeting the previously agreed thresholds should receive alliance protection. Since returning to the White House, Trump and his administration have continued the same message. That said, in February 2025, Trump offered direct public support for the United States honoring its Article 5 commitment and the administration clarified that it did not intend to withdraw from the alliance.
However, the administration’s messaging creates an element of ambiguity, suggesting that the United States’ participation in joint exercises, force posture in Europe, and collective defense commitments may be contingent upon allies meeting specific defense spending thresholds, potentially as high as 5% of GDP. This administration’s policy on NATO is open for interpretation and consequently perceived by some allies as unclear if or to what extent U.S. policy will change. Accordingly, it appears that Trump is attempting to use rhetoric, albeit fierce, to make a geopolitical deal.
How is NATO funded?
Alliance members predominantly fund NATO through direct and indirect financial contributions. Based on NATO’s latest figures as of December 2024, NATO expects to receive around $4.9 billion of direct funding from its members in 2025. These are funds allocated directly from an alliance member to NATO and used for costs associated with the NATO Headquarters, the command structure, and certain infrastructure investments. Although all members provide direct funding, the six wealthiest nations provide over two-thirds. The United States and Germany are the largest providers through the agreed-upon cost-sharing formula, contributing 15.8% of each. In comparison, the United Kingdom, France, Canada, and Italy each average 9% of total direct funding, with all other alliance members averaging 1.2%.
NATO estimates there will be over $1.4 trillion of indirect funds in 2024, roughly 66% of that coming from the United States. These funds reflect alliance members’ defense expenditures on their militaries. Each nation seeks to meet an agreed-upon amount based on an individual nation’s GDP. This is the often-cited 2% threshold many fault alliance members for not meeting. However, one must understand the origins of that threshold before judging a nation’s contribution effort.
How did the current indirect funding threshold originate?
NATO’s founding members signed the Washington Treaty in 1949 promoting the “preservation of peace and security” in the North Atlantic area amid the escalating Cold War.
With the dissolution of the Soviet Union, NATO decreased defense expenditures throughout the 1990s. This trend reversed after the 9/11 terrorist attacks and the American-led Global War on Terror. During the George W. Bush administration in 2006, nations agreed to allocate a minimum of 2% of GDP on defense, ensuring military readiness and projecting a unified political front. In response to the 2008 financial crisis, most allies decreased their defense budget and assumed risk with what they perceived to be an economically weak and militarily unproven Russia. This changed following Russia’s annexation of Crimea in 2014. The Obama administration helped lead efforts for NATO’s Defense Investment Pledge (DIP), which specified members halt declining defense spending, spend 20% of defense expenditures on major new equipment, and “aim to move towards the 2% guideline within a decade.” Members have routinely reaffirmed these commitments, most recently at the 2024 Washington Summit. So, how have members fared against the three parts of the DIP since 2014?
Has the DIP achieved its intended objectives?
Data on the first two parts of the DIP are unambiguous and generate minimal debate. As of December 2024, current NATO data shows all nations exceeded their 2014 baseline, with growth measured in current and constant 2015 prices in national currencies. Over the same period, NATO went from having 6 of 28 members spending at least 20% of defense expenditures on new equipment to 29 of 32 members doing so, with a projected mean of 32% for 2024. Belgium improved from sitting at less than 4% in 2014 to exceeding 20% in 2022 and 2023, but sliding to 15% in 2024. Canada invested 13% in 2014 and is nearing the target goal with 18.6% invested in new equipment in 2024. Iceland, although a member of the alliance, lacks a military. An assessment of the final part of the DIP, meeting the 2% threshold, is complex and invites debate.
Despite considerable progress in burden-sharing for collective defense, some members still fall short. In 2014, 3 of 28 members met the 2% goal, with European allies and Canada averaging 1.43%. However, in 2024, NATO estimates that 24 of 32 members will meet the 2% goal, with European allies and Canada averaging 2.02%. So, although most members are meeting all parts of the DIP, eight still fall short of the 2% threshold, two of which are Canada at 1.37% and Italy at 1.49%. More troubling, Canada is one of the two nations falling below the 2% of GDP threshold for overall defense spending and the 20% threshold for defense spending on new equipment; Belgium is the second.
What is missed with a singular focus on the 2% threshold?
Three factors provide a nuanced perspective and highlight why an exclusive focus on the 2% defense spending target is misleading. First, focusing solely on the 2% GDP target overlooks the fact that European allies have largely met the other parts of the DIP. Two related points also bear repeating. According to the unanimously agreed-to pledge, the 2% target is a “guideline” and not a strict requirement, and the “within the decade” provision means by 2024, not annually through 2024.
Second, equitable indirect financial contributions do not significantly increase NATO’s absolute security capacity. For example, Germany’s GDP is ten times larger than that of the 10 smallest economies in NATO. Meaning there is a substantial difference in the overall military capacity gained by NATO when large economies verse small economies meet the 2% goal. It is important to emphasize that a significant increase in NATO capability, not simply equitable inputs, advances America’s interests. That said, 2024 is the first year Germany is expected to meet the 2% goal.
Another perspective, nations nearing the 2% goal in 2024, such as Croatia at 1.81%, could slightly increase defense spending on operational support costs like personnel pay, thereby meeting the guideline without increasing NATO’s security capacity. Again, simply meeting the 2% target would proportionately share the financial burden but would not contribute substantially to NATO’s collective defense. Smaller nations’ most significant contributions are supporting trans-Atlantic unity and granting NATO members access, basing, and overflight privileges. Overall, individual nations’ contributions to the alliance remain mixed, and focusing solely on the 2% defense spending target fails to highlight a broader perspective.
Third, meeting the 2% defense spending target does not encompass all costs that advance NATO’s objectives. The Kiel Institute tracks assistance to Ukraine in its fight against Russia; NATO described this war as “the most significant and direct threat to the allies’ security and peace, and the stability in the Euro-Atlantic area.” As of February 2025, European allies and Canada have allocated $87 billion, representing 31% of the total bilateral financial, humanitarian, and military assistance to Ukraine. This figure increases to $141 billion, accounting for 49% of the total when including the direct contributions made by the European Union Commission and Council. Despite spending less than 2% of GDP on defense, Canada ranks 4th among NATO members in total bilateral assistance allocation. Similarly, many European nations have spent billions restructuring their energy networks to reduce dependency on Russian oil and gas; Germany was the largest importer of Russian energy but is now independent.
Furthermore, a recent CSIS report concluded that including costs like these in NATO’s 2023 defense spending numbers would result in 11 members exceeding 3% and 14 members exceeding 4%. In fact, only three NATO members would not meet the 2% threshold. Of these, Iceland lacks a military, and there was insufficient publicly available data on Montenegro and North Macedonia to complete the analysis. Note that these numbers would increase if factored into 2024 data, as members’ defense spending has continued to increase over the past year. Although not defense expenditures, these additional state expenses align with the Washington Treaty and bolster trans-Atlantic security, thereby supporting American interests.
Defense Spending: Rhetoric to Reality
Although Trump’s comments on NATO invite debate, his underlining theme has legitimacy. The United States accounts for nearly 66% of NATO’s indirect funding, despite accounting for just over 50% of the alliance’s collective GDP value. Given that indirect funding is measured as a percentage of GDP, the United States’ contribution should proportionally reflect its economic size and therefore nearly equal the combined indirect funding of all other allies. Similarly, the Kiel Institute reports that the United States has allocated $123 billion, representing 43% of total bilateral assistance to Ukraine. Additionally, the U.S. has roughly 84,000 military members stationed in Europe, which is equal to the 10 smallest NATO members’ militaries combined. It bears repeating that past administrations, from both sides of the political aisle, have made the fair-share argument, albeit, often with a more measured tone. Nevertheless, with Canada as the most significant outlier, European allies have largely met the unanimously agreed-to goals established a decade ago. Criticism of NATO must be nuanced.
Furthermore, even though the United States spends more on collective defense, it benefits in ways others do not. NATO advances American interests by offering support and legitimacy to American foreign policy and facilitates American strategic goals of defense-in-depth and power projection. This is seen through access and basing for American forces, specifically strategic bombers, naval craft, and tens of thousands of ground forces. European bases and intelligence sharing support American-led operations across Africa, Europe, and the Middle East. These missions, directly supported by NATO or by NATO members, have cost other members thousands of casualties in conflicts that would have otherwise burdened the United States.
The NATO alliance also helps promote favorable trade agreements for the United States and facilitates investments into American industries from foreign military sales. Internally to the alliance, NATO’s Supreme Allied Commander is responsible for all NATO operations and is always an American. Overall, the United States pays a disproportionate price for a disproportionate benefit. And not to be forgotten, the United States does not have the largest defense budget in the world to advance NATO’s interests; over 3% of the world’s largest GDP goes towards preserving American preeminence.
What lies ahead?
Allied defense spending is increasingly converging towards the target of equal burden-sharing, demonstrating a commitment to collective responsibility and advancing American interests. Full adherence to the DIP by all allies will likely also be perceived as a demonstration of enhanced political unity and military capability, regardless of attribution. Since Trump’s return to the White House, French and British leaders have emphasized the need for Europeans to “more fairly share the security burden.” To demonstrate this, Denmark and the United Kingdom stated they will increase their defense budgets to 2.5% and 3% of GDP respectively by 2026, whereas Latvia and Lithuania will seek to achieve at least 5% of GDP. Although Trump is not the first to pressure Europeans and Canada to meet the 2% goal, many credit him with the recent acceleration of allies meeting or exceeding DIP goals.
Perhaps Trump’s rhetoric on NATO is just the most recent iteration of the art of the deal, perhaps not. Regardless, rhetoric carries risks. There is growing discussion of Europeans shifting priorities from NATO to a European-only defense structure. This could open the aperture for Europeans to seek a more reliable partner to augment their capabilities and subsequently erode the benefits the United States receives from NATO.
Short of that reprioritization, disenfranchised allies may be less likely to provide the United States Article 5 collective defense support in the future, as they offered in the aftermath of the 9/11 terrorist attacks. They will likely be similarly frugal in supporting American military and clandestine operations marred with legal and ethical ambiguities. Winston Churchill offered sage advice to that overarching theme: “The only thing worse than fighting with allies, is fighting without them.”
With bipartisan support in 2023, Congress limited any President’s power to unilaterally withdraw from NATO, thereby minimizing the most significant threat to the trans-Atlantic relationship. Additionally, as Trump continues pressuring European and Canadian leaders for increased defense spending, he has committed to the alliance’s Article 5, further reducing the foundational threat to the alliance. Nonetheless, in the words of NATO Chief Stoltenberg, grandiose rhetoric that misses the nuanced details of burden-sharing undermines “all of [NATO’s] security, including that of the United States.”
Disclaimer: The views expressed in this article are those of the author and do not reflect the official policy or position of the Department of the Army, the Department of Defense, or the U.S. Government.
