Trump's pressure on NATO allies shifts taxpayer costs in two directions at once: it raises the defence bill European and Canadian taxpayers must fund, and it does almost nothing to lower what American taxpayers pay. At the Hague summit on 25 June 2025, all 32 NATO members agreed to spend 5% of GDP on defence and defence-related items by 2035 — and Al Jazeera reported the split as at least 3.5% on core defence plus up to 1.5% on cyber, critical infrastructure and the defence industry, with a review in 2029. The practical question for any taxpayer is not the GDP percentage but how the money is raised. Allies are choosing between tax rises, cuts to other public spending, and borrowing — and most have chosen borrowing, which moves the cost to future taxpayers rather than removing it.
Table of Contents
- What the 5% target actually commits governments to
- How much have allies actually raised so far?
- The direct trade-off, priced
- Germany and the EU chose debt
- Why burden-sharing has not cut the US bill
- Tariff enforcement and the headline-versus-real-money gap
- Frequently Asked Questions
What the 5% target actually commits governments to
The 5% figure is not one pot of money. The binding core is 3.5% of GDP on traditional defence — troops, weapons, bases, munitions.
The remaining 1.5% covers "defence-related" spending: cyber defence, bridges and ports with military use, and support for domestic arms manufacturers. Trump has claimed the target will add more than $1 trillion a year to allied defence spending, and, according to Anadolu Agency, said the pledge should carry his name as "The Hague defense commitment." The 2035 deadline and the 2029 review matter for anyone judging the near-term tax impact. A ten-year ramp means most of the money has not yet been raised, and the mid-point review gives governments a formal opportunity to slow the path.
How much have allies actually raised so far?
Real spending has moved, but unevenly. NATO's annual report presented by Secretary General Mark Rutte on 26 March 2026 found European allies and Canada raised defence spending about 20% in real terms during 2025, with alliance-wide spending reaching 2.77% of GDP. As Reuters reported, the United States still accounted for roughly 60% of total alliance spending.
The country-level picture shows how far most taxpayers are from the new target. Only Poland (4.3% of GDP), Lithuania and Latvia exceeded the 3.5% core-defence threshold in 2025, while Spain, Canada and Belgium sat near 2%, according to Polish state agency PAP. That gap is the heart of the taxpayer story. In most NATO countries, the cost of the Hague commitment has been promised but not yet charged.
The direct trade-off, priced
The clearest published price tag comes from the UK. The Institute for Fiscal Studies, an independent economic research body, estimates that moving UK defence from 2.3% to 3.5% of GDP costs about £36 billion a year — roughly £500 per person — and that the money can only come from cutting other spending, raising taxes, or borrowing.
Its Green Budget 2025 analysis frames this as reshaping the British state rather than as a line-item adjustment. Three routes, three different groups paying: Scale the per-person figure as a rough reference point, not a forecast: a country starting further from 3.5% faces a larger jump, and one already above it faces none.
- **Tax rises** — current taxpayers pay now, visibly.
- **Spending cuts** — users of other public services pay, through reduced provision rather than a higher bill.
- **Borrowing** — future taxpayers pay, with interest.
Germany and the EU chose debt
Germany, the alliance's largest European economy, is financing its increase mainly with borrowing rather than current taxes. It amended its constitutional "debt brake" — a cap on federal borrowing written into the constitution — to exempt defence spending above 1% of GDP. Its 2026 budget pairs roughly €83 billion of core defence spending with €25.5 billion from the off-budget Bundeswehr fund and record total borrowing, according to analysis by Poland's Centre for Eastern Studies.
The EU built the same choice into a shared instrument. The SAFE facility lends member states up to €150 billion for defence procurement, which, as a Bruegel working paper sets out, shifts the cost onto national borrowing repaid by future taxpayers rather than onto today's budgets. For a reader tracking their own exposure, this is the decisive distinction. A country funding defence through debt is not asking less of taxpayers — it is asking later, and asking for more once interest is counted.
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Why burden-sharing has not cut the US bill
American taxpayers are not seeing a dividend from allied increases. The White House's FY2027 request seeks roughly $1.5 trillion for defence, a $445 billion jump over FY2026, according to a CSIS analysis of the topline.
That figure combines a $1.15 trillion base request with $350 billion contingent on a separate reconciliation bill Congress has not passed. That contingency is the number to watch. Roughly a quarter of the headline total depends on legislation that does not yet exist, so the $1.5 trillion figure is a request, not an appropriation — and the base request alone is the amount currently in play.
Tariff enforcement and the headline-versus-real-money gap
Pressure on allies has consumer-price consequences, not just budget ones. On 14–15 October 2025, Trump threatened to double tariffs on Spain — the only ally rejecting the 5% objective — after Prime Minister Pedro Sánchez capped Spanish spending at about 2.1%, and Al Jazeera reported that the European Commission said it would respond to measures against any member state.
Tariffs raise import prices, so an enforcement dispute over defence percentages can reach household costs through a route that has nothing to do with a defence budget. Two cautions when reading any GDP-share headline: Both points mean headline GDP shares overstate genuinely new money, as the UK Defence Journal noted in reviewing NATO's 2025 expenditure report. Before accepting that your country's defence spending has risen by a given share, check whether reclassified infrastructure fills part of the gap — in which case the percentage moved and the tax bill did not.
- NATO's expenditure definition is broader than many national budget lines, so a country's NATO figure may exceed what its own defence ministry reports.
- The 1.5% "defence-related" tranche can absorb infrastructure and cyber projects governments would have funded anyway.
Frequently Asked Questions
Does the 5% target have to be met immediately?
No. The Hague commitment sets 2035 as the deadline, with a review in 2029, so the spending ramps over a decade rather than landing in a single budget year.
Which countries already meet the core 3.5% level?
In 2025, only Poland at 4.3% of GDP, plus Lithuania and Latvia, exceeded it, according to PAP's reporting on NATO figures.
Will allied spending increases reduce what US taxpayers pay?
Not so far. The US still accounts for roughly 60% of alliance spending, and the FY2027 request seeks a $445 billion increase over FY2026.
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