NATO Report Reveals Historic 20% Surge in Defense Spending by European Allies and Canada

NATO Secretary General Mark Rutte published his 2025 annual report on Thursday, revealing that European allies and Canada increased defense spending by 20% in real terms compared to 2024, reaching a combined total of $574 billion — the first time European and Canadian NATO members have collectively surpassed the half-trillion-dollar mark. The report also confirmed a historic milestone: for the first time since the 2% of GDP target was set in 2014, all 32 member states met or exceeded that threshold in 2025. Rutte used the report's publication to press allies to maintain momentum ahead of the next alliance summit, scheduled for July 7-8, 2026, in Ankara, Turkey.

„I expect Allies at the next NATO Summit in Ankara to show they are on a clear and credible path towards the 5% objective. A strong transatlantic bond remains essential in an age of global uncertainty.” — Mark Rutte via Reuters

NATO's 2% of GDP defense spending target was first established at the 2014 Wales Summit, following Russia's annexation of Crimea. Between 2014 and the end of 2025, European allies and Canada more than doubled their annual defense budgets in real terms, representing an increase of 106%. The June 2025 summit in The Hague set a new, more ambitious target of 5% of GDP by 2035, divided into 3.5% for core military capabilities and 1.5% for broader security investments including cybersecurity and infrastructure protection.

Poland and Baltics already clear the new 3.5% core defense bar Three NATO member states — Poland, Lithuania, and Latvia — already exceeded the new 3.5% core defense target in 2025, years ahead of the 2035 deadline. Poland led the entire alliance with defense spending at 4.3% of GDP, followed by Lithuania at 4%, Latvia at 3.74%, and Estonia at 3.42%. Denmark and Norway also surpassed the United States in terms of defense spending as a share of GDP, with 3.34% and 3.2% respectively. At the other end of the scale, Spain, Portugal, Canada, Belgium, and Albania each spent exactly 2% of GDP — meeting the old threshold but far short of the new ambition. Luxembourg, Belgium, and Slovenia recorded the largest year-on-year increases in absolute terms, while Hungary, the Czech Republic, and the United States saw their defense budgets fall. Romania spent an estimated 2.21% of GDP, or $8.4 billion, on defense in 2025, placing it above France, Italy, and Spain by that measure, according to the report.

U.S. share of alliance spending drops as European budgets grow The United States remained by far the largest single contributor to NATO defense spending in absolute terms, with a budget of $838 billion in 2025, though that figure fell slightly from $850 billion in 2024. As European and Canadian budgets grew, the U.S. share of total alliance defense expenditure dropped from 64% in 2024 to approximately 59-60% in 2025. In absolute terms, U.S. spending still exceeded the combined total of all other alliance members. The overall alliance spent 2.77% of GDP on defense in 2025, while European members and Canada collectively spent 2.33% of GDP. Europe and Canada's spending on major equipment increased by 34% over the year, according to the report.

U.S. share of NATO defense spending: U.S. defense budget (before: $850 billion (2024), after: $838 billion (2025)); U.S. share of total NATO spending (before: 64% (2024), after: ~59-60% (2025)); European allies + Canada combined (before: $480 billion (2024), after: $574 billion (2025))

Trump attacks allies over Iran even as European budgets surge Despite the record increase in European defense spending, U.S. President Donald Trump sharpened his criticism of NATO allies on Thursday, the same day the report was published. Trump posted on Truth Social that NATO countries had done "absolutely nothing" to help with Iran, a reference to the ongoing U.S.-Israel military campaign against Iran that began in late February 2026. Trump has repeatedly demanded that European allies assume primary responsibility for the conventional defense of the continent, a position his administration has maintained since returning to office in January 2025. Rutte, in turn, acknowledged the long-standing imbalance in his report, stating that European countries and Canada had relied too heavily on U.S. military power for too long, but argued that the mindset had changed significantly. The next opportunity for allies to demonstrate that shift will come at the Ankara summit in July 2026, where Rutte said he expects allies to present credible plans for reaching the 5% target.

574 (billion USD) — European and Canadian NATO defense spending in 2025