Europe and Canada’s defense budgets jumped 20% to $574 billion in 2025—yet the U.S. still bankrolls 60% of NATO’s total bill, even as Washington’s contribution edged lower.
European and Canadian allies poured a combined $574 billion into NATO defense budgets last year, a 20% surge in real terms, even as U.S. spending dipped from $850 billion to $838 billion—leaving Washington shouldering 60% of the alliance’s total nominal defense bill.
The figures, released Thursday in NATO Secretary General Mark Rutte’s annual report, confirm a historic first: for the 11 years since the alliance established its 2% of gross domestic product spending benchmark, all 32 member nations have now met or exceeded that floor simultaneously.
“All allies reported defence expenditure figures that met or went beyond the 2% target first set in 2014, with many making steep increases in spending,” Rutte said.
Combined NATO defense spending reached an estimated $1.4 trillion in 2025, up from roughly $1.3 trillion the previous year.
Washington remained the alliance’s dominant contributor by a wide margin. The U.S. outlay of $838 billion represented 3.19% of its GDP—accounting for 52% of allies’ combined GDP and 60% of combined nominal defense expenditure, despite falling modestly from the prior year’s $850 billion.
Europe and Canada’s sharp climb narrowed but did not close that gap. Rutte credited the broader shift to an alliance-wide reassessment of security priorities.
“This shows that NATO allies recognise our changed security environment, and the need to meet our collective obligations,” he said.
Five nations—Albania, Belgium, Canada, Portugal and Spain—are expected to have allocated exactly 2% of GDP to defense, while eight others landed at up to 2.1%: Croatia, Czech Republic, France, Hungary, Italy, Montenegro, Slovakia and Slovenia. NATO’s two newest members, Finland and Sweden, spent 2.87% and 2.5% respectively. Iceland, which maintains no armed forces, was excluded from the figures.
The 2% milestone, however, already lags NATO’s ambitions. Rutte is pressing allies to commit to a steeper target—5% of GDP on combined defense and security spending—by 2035, a benchmark formally agreed at last year’s summit in The Hague.
“I expect allies at the next NATO Summit in Ankara [in July] to show they are on a clear and credible path towards the 5% objective,” Rutte said.
Three nations on NATO’s eastern flank have already cleared the alliance’s interim 3.5% defense-only marker, a full decade ahead of schedule. Poland leads all allies at 4.3% of GDP, followed by Lithuania at 4% and Latvia at 3.74%.
Heavy equipment investment reinforces that posture. All but three member nations—Estonia, Albania and Belgium, in declining order—surpassed NATO’s 20% guideline for defense spending directed at equipment purchases and research and development. Luxembourg topped the list at 55%, followed by Poland at 50.7% and Hungary at 48.2%.
The report also spotlights NATO’s deepening support for Ukraine through the Prioritised Ukraine Requirements List, or PURL. The mechanism “is channelling American military hardware into Ukraine, paid for by allies and partners”, the report states, with a particular emphasis on air defense system equipment. National contributions began in August 2025.
“As of December 2025, more than two thirds of allies and two partners – Australia and New Zealand – had contributed to PURL,” the report states.
Rutte anchored the spending data in an explicit threat assessment. “Russia remains the most significant and direct threat to our security and to peace and stability in the Euro-Atlantic area,” he said, adding that “strategic competition is rising, terrorism is a persistent threat to NATO, and our southern neighbourhood is volatile.”
Key Takeaways
- NATO’s combined defense spending reached an estimated $1.4 trillion in 2025—the first year all 32 members simultaneously met the 2% GDP benchmark.
- U.S. spending edged down from $850 billion to $838 billion, yet Washington still accounts for 60% of allies’ total nominal defense expenditure.
- Europe and Canada’s collective defense investment surged 20% in real terms to $574 billion, narrowing but not closing the gap with U.S. contributions.
- Secretary General Rutte is pushing allies toward a new 5% combined defense-and-security target by 2035, with a progress commitment expected at the Ankara summit in July.
- Poland (4.3%), Lithuania (4%), and Latvia (3.74%) already exceed NATO’s interim 3.5% defense-only benchmark—a decade ahead of schedule.
