As Nato leaders gather under the banner of “collective defence”, a familiar claim continues to echo from Washington: that the United States carries the alliance on its shoulders. In raw cash terms, that remains true. The US spent roughly $980bn (£720bn) on defence last year – around 62% of total Nato outlay. Yet measured as a share of national wealth, the picture looks very different.
According to Nato estimates for 2025, it is not the US that tops the table for defence spending as a percentage of GDP. That distinction belongs to Poland, projected to spend 4.48% of its economy on defence. Lithuania follows at 4%, with Latvia at 3.73% and Estonia at 3.38%. Norway and Denmark also exceed 3%, while the United States stands at 3.22%.
The contrast underlines a central tension within the 32-member alliance. Washington remains the indispensable military superpower, but several frontline European states now devote a greater share of their national income to defence. For countries bordering Russia or close to the war in Ukraine, the threat is immediate and existential. For the US, whose GDP exceeds that of all other Nato members combined, global commitments stretch far beyond Europe.
Until recently, Nato’s benchmark required members to spend 2% of GDP on defence. In 2025, every ally has met or exceeded that threshold – including Spain, long criticised for lagging behind. Leaders have now gone further, committing to invest 5% of GDP annually on defence and security-related spending by 2035, with 3.5% allocated to core defence and up to 1.5% to infrastructure, cyber resilience and civil preparedness.
Eastern Europe’s spending surge
The countries spending most heavily relative to GDP are overwhelmingly in Eastern and Northern Europe. Poland has led the pack for several years, investing heavily in drones, artillery and fighter aircraft. It has diversified suppliers, purchasing systems from South Korea as well as the US, in a bid to accelerate deliveries.
The Baltic states – Lithuania, Latvia and Estonia – have adopted what officials describe as a “porcupine” strategy: small, mobile, lethal systems designed to deter or blunt a larger Russian force. All three plan to approach or reach 5% of GDP in the coming years.
Even traditionally cautious spenders have shifted. Germany crossed the 2% mark for the first time since 1990, driven by what former chancellor Olaf Scholz termed a Zeitenwende – a historic turning point. Sweden, which joined Nato in 2024, has rapidly increased defence allocations, while Finland has moved well beyond its pre-accession levels.
By contrast, several southern and western European countries have only just reached the 2% baseline. Italy, Belgium and Spain have faced domestic political resistance and fiscal constraints. Canada, too, has historically underinvested relative to its size, though it has pledged to accelerate spending.
America’s weight – and Europe’s response
Despite these shifts, the US remains the financial and military anchor of Nato. Its defence budget, though falling from 3.6% of GDP in 2020 to an estimated 3.2% in 2025, dwarfs all others in absolute terms. It also underwrites capabilities – from nuclear deterrence to global logistics – that European allies cannot yet replicate.
Yet the political mood is changing. At the Munich Security Conference, European leaders openly acknowledged the need for a stronger “European pillar” within Nato. German Chancellor Friedrich Merz argued that membership is “not only Europe’s competitive advantage, it’s also the United States’ competitive advantage”. French President Emmanuel Macron called for Europe to “accelerate and deliver all the components of geopolitical power”.
American officials have welcomed the trend. Undersecretary of Defense Elbridge Colby said Washington wants “vigorous, capable, more self-reliant European allies”, arguing the US has long borne a “vastly disproportionate share” of the burden.
The alliance’s own budget – around €5.3bn for 2026 – is modest by comparison, with the US and Germany each contributing about 15%, and the UK and France roughly 10%. Even here, Washington’s share has fallen from more than 22% under a revised formula agreed in 2019.