Commitment will raise spending on the sector to 5% of GDP by 2035; previous goal was 2% of gross domestic product
NATO’s new commitment to increase defense spending to 5% of GDP (Gross Domestic Product) by 2035 should almost double the annual expenses throughout the alliance to $ 3.0 trillion, according to BTig Research.
The commitment, formalized at the NATO 2025 dome in The Hague, is divided into 3.5% to “Central Defense”including personnel, operations, maintenance and military equipment, and 1.5% for infrastructure and industrial expansion.
All Member States, except Spain, agreed with the commitment. The United States is not expected to meet the goal, with President Donald Trump arguing that US contributions already exceed the fair portion.
In 2024, NATO members collectively spent $ 1.5 trillion in defense, or 2.7% of GDP. The US provided this value, followed by Germany and the United Kingdom.
Defense spending grew 14% over the previous year, driven mainly by European allies, who increased their budgets by 22% after the Ukraine invasion of Russia by 2022.
If the 3.5% target for central defense is reached by all members, excluding Spain and the US, total central defense expense could reach $ 24.2 trillion between 2025 and 2035.
Of this amount, $ 13.9 trillion would come from the US, assuming that the country maintains the current levels of approximately 3.3% of GDP. The remaining $ 10.3 trillion would come from other members of the alliance.
Military equipment represents about 32% of current defense expenses. If this proportion remains, NATO could spend approximately US $ 8.8 trillion on equipment in the next decade.
Almost all members already meet the requirement of spending at least 20% of their defense budgets on equipment, except for Belgium and Canada.
European countries have limited defense manufacturing capacity, which may support the dependence on US contractors.
BTIG estimates that US companies could capture up to NATO European spending with equipment by 2035, representing an export opportunity of US $ 2.7 trillion.
This is almost double the $ 1.4 trillion estimated under the previous goal of 2% of GDP spending.
Infrastructure investments are expected to increase significantly, as no member currently spends close to the 1.5%target.
Estonia and Lithuania lead, but allocate only about 0.3% of GDP for defense infrastructure.
New spending is intended to modernize military transport routes, improve cybersecurity and protect energy systems.
Poland is the only country that currently reaches the full limit of 3.5% for central defense. No country reaches the 1.5% level in infrastructure.
US participation in defense spending could fall to just over 50% by 2035, below ⅔ by 2024.
With information from Brazil.com.
