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NATO’s growing defence expenditure is poised to intensify a range of geopolitical dynamics.

For anyone who is piqued by US President Donald Trump’s deceptive diplomacy, where ‘strategic ambiguity’ is a policy choice, his volte face on North Atlantic Treaty Organization (NATO) offers key insights. During the recently-held NATO summit in The Hague, perhaps the biggest development was Trump’s metamorphosed views that NATO remains relevant for the US. A strong signal from the NATO countries that its European members have reached a near unison on spending close to 5% of their GDP on defence, compelling a change of heart in Trump. In what has been seen as very encouraging by member countries, Trump referred to NATO as not a ‘rip off’ anymore and reaffirmed US’ commitment to it. These developments provided a positive appraisal of the transatlantic relations, especially against the stark background of a consistent broadside since the beginning of the second Trump administration, inflected by Vice President JD Vance’s Munich Security Conference speech earlier this year. Whether this sentiment from the Oval Office will remain consistent for the remainder of Trump’s term may be anyone’s guess but the Hague summit’s new promise on burden sharing across the Atlantic is historic and marks a new era in NATO’s  evolution as a leading collective security organisation.

A strong signal from the NATO countries that its European members have reached a near unison on spending close to 5% of their GDP on defence, compelling a change of heart in Trump.

The Hague defence commitment this year promises to increase defence spending by NATO member countries to 5% of GDP by 2035, out of which 3.5% will be allocated to core defence needs and the rest to related aspects of security such as infrastructure, intelligence, cybersecurity, etc. By the end of this year, NATO expects all allies to meet or exceed at least 2% of GDP expenditure on defence. These commitments are broadly distributed across three domains—deterrence and defence, crisis prevention and management, and cooperative security.

Perhaps the single most important trend coming out of the Hague summit was how Europe’s intentions to spend more on collective defence resonated with global spending trends. Beside political signalling and repercussions for transatlantic ties, the NATO summit this year is reflective of a broader trend – the surge in global defence spending. Compared to the Cold War period between 1970-1990, global defence spending as a percentage of GDP halved from 3.6% to 1.9% between 2010-2019. This trend, however, is reversing rapidly, with global military expenditures crossing $2700 billion in 2024. In 2024, global defence spending, which increased by more than 8% and was backed by augmented European commitments, is likely to scale further. While much of this trend has been churned and fuelled by the ongoing wars in Europe and the Middle East, the former’s aim for an ambitious defence package through its ReArm Europe or Readiness 2030 plan and the US’ decision to increase its defence budget to almost $1 trillion may hasten the end of the ‘era of the peace dividend.’

Beside political signalling and repercussions for transatlantic ties, the NATO summit this year is reflective of a broader trend – the surge in global defence spending.

Trump’s report card that the summit was ‘a very historic milestone’ and the Hague defence commitment, ‘a monumental win for the United States….and a big win for Europe..’ seems to suggest that Europe may have been able to put behind one of the most nagging issues that marred transatlantic ties in recent months—defence spending. As such, the Hague summit this year provides the opportunity to mark new European imprint on the NATO in several ways. The allies’ step up in their financial commitments towards boosting collective defence may be Europe’s moment of renaissance in restoring the transatlantic politico-security equilibrium. Besides, the ability to spend more by NATO members could also mean greater leverage in deciding the course of such expenditure. For instance, in the context of the ongoing Russia-Ukraine conflict, Europe’s trajectory would have been completely different, had NATO members been spending at 5% of their GDPs on defence. The other question for Europe, as for the US, is managing fiscal sustainability and nursing high levels of public debt internally alongside increased spending on defence and security.

Despite a positive appraisal by Trump and increased defence spending, Europe’s woes are far from over. The Hague defence commitment takes a long arc in seeking to achieve the stated 5% mark with some countries like Spain and Italy remaining somewhat sceptic. Riding on these concerns is Trump’s inconsistency and unpredictability, which could hyphenate Washington’s other impediments apropos of Europe, with its collective security commitments and the lack thereof, bringing ties back to the drawing board.

The Hague summit spurred a critical moment in the evolution of NATO and collective security. Trump’s ire, after all, is not seen as a negative development for Europe entirely, but rather a jolt that Brussels needed. However, by aligning itself with the world more closely with increased defence spending, Europe may well be on its course to change its image as a peaceful continent—an image led by a vibrant economic union like no other.

Over the next decade, efforts to consolidate transatlantic security are likely to reverberate along opposing axes, with China, Russia, Iran, and North Korea coordinating strategies to counter the West.

At the global level, these changes converge with NATO’s emerging intent to pivot eastward and deepen engagement with countries in the Indo-Pacific, albeit not directly in the realm of defence and security. While Trump may have framed NATO’s budget realignments as a victory for the US, the political, security, and economic recalibrations underway within the alliance could significantly reshape NATO’s profile, particularly from a European standpoint. Over the next decade, efforts to consolidate transatlantic security are likely to reverberate along opposing axes, with China, Russia, Iran, and North Korea coordinating strategies to counter the West. NATO’s growing defence expenditure is poised to intensify a range of geopolitical dynamics in the years ahead—chief among them being escalating great power competition, rapid innovation in defence and technology, and the deepening fracture of the world order.

Harsh V Pant (Vice-President ORF) and Vivek Mishra (Dep.Dir.ORF)
22 July 2025

 

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