Trump wants NATO to hit 3 percent GDP on defense. The US could fall short

Donald Trump wants to raise the bar for NATO, with the former president pledging that if he wins in November he will push NATO allies to raise the target for their defense budgets from two to three percent of gross domestic product (GDP).

US allies and partners can and should spend more on defense. A NATO in which allies spent 3 percent of GDP would undoubtedly mean a stronger alliance and a safer Europe. But to meet that standard — and more importantly meet the military challenge posed by China — the United States will have to spend more on defense too.

It is simple mathematics that the United States cannot meet a “3 percent of GDP” standard in the coming years without a significantly higher defense budget. Pushing that standard abroad while advocating flat defense spending at home verges on strategic hypocrisy — an assertion of “3 percent for thee but not for me.”

The United States barely meets the 3 percent of GDP standard today. But according to budget projections from the Congressional Budget Office, meeting that goal four years from now, at the end of a potential second Trump administration, would require a US defense budget of $1.03 trillion, roughly $109 billion more than today. To hit that target, defense spending would need to grow by 2.9 percent each year until 2029, and even faster in future years. But over the last decade, the average annual increase to the military’s budget was just 0.9 percent.

Even with its budget growing at 3.4 percent per year, the Department of Defense could still lose the buying power it needs to achieve and sustain an advantage against China in the Indo-Pacific. That’s because inflation and other sources of cost growth for the military regularly exceed inflation in the rest of the economy. Put simply, defense budgets that rise at inflation result in a shrinking, aging and less advanced military.

Making matters worse, DoD appears to be underestimating the cost of its own plans. According to the CBO, if cost growth follows long-term trends, defense costs from 2024 to 2038 would be nearly $600 billion higher than Pentagon leaders assume. “Accommodating those higher costs,” warns the CBO, “would require DoD to scale back its plans or request larger budgets than it anticipated.”

The US defense budget isn’t set to meet arbitrary spending targets but to defend the nation against its adversaries. And with China first among them, a historically-low 3 percent of GDP simply will not do. President Ronald Reagan spent roughly 6 percent of GDP to defeat the Soviet Union. The United States spent almost 5 percent at the peak of the wars in Iraq and Afghanistan.

Bipartisan civilian and military experts have recognized the need for increased defense spending for years. Back in 2017, Secretary of Defense Jim Mattis and Chairman of the Joint Chiefs of Staff Joe Dunford recommended that defense spending increase by 3 to 5 percent above inflation annually. That target was endorsed by the bipartisan 2018 Commission on the National Defense Strategy (NDS). The US has not met that goal over the last 6 years, leading the most recent 2024 NDS Commission to say 3 to 5 percent annual growth above inflation is the “bare minimum” required.

But many self-described “realists” in Trump’s camp say higher defense budgets are politically unrealistic or would take too long to yield results. For instance, his former national security advisor predicts, “Spending smarter will have to substitute for spending more.” More dramatically, Chris Miller, Trump’s former acting defense secretary who helped craft the Project 2025 document seen by many as a blueprint for a second Trump term, has called for cutting the defense budget in half.

Ironically, many of those “realists” are cheering on Trump’s demand that European nations provide 3 percent, arguing that that refusal to spend more on defense reveals naivete in allied capitals about the dangers that confront us.

Perhaps, but much the same could be said here at home. The idea that the United States can prevail in a long-term competition with China with flat or declining budgets is fundamentally unserious.

Higher defense spending will not be easy in Washington or in any NATO capital, but the perceived politics of the moment must not prevent us from answering the real demands of the future. It is far cheaper to deter a war than to fight one. That’s why a greater commitment to defense is needed on both sides of the Atlantic.

Dustin Walker is a non-resident fellow at the American Enterprise Institute. Mackenzie Eaglen is a senior fellow at the American Enterprise Institute.