NATO Nations to Raise Defense Spending to 5% of GDP by 2035, Affecting U.S. Budget and Industry

NATO member states, including the United States, have committed to significantly boosting defense spending over the next decade, with a new target of 5% of gross domestic product (GDP) annually by 2035. The agreement, made during a summit in The Hague on June 25, 2025, marks one of the most substantial shifts in alliance-wide defense funding in NATO’s history and is expected to influence government budgets, infrastructure investments, and defense industry activity in the U.S.

Under the new framework, member nations will allocate at least 3.5% of GDP annually toward traditional military spending to meet NATO Capability Targets. An additional 1.5% will be used to secure critical infrastructure, bolster cybersecurity, support civilian resilience, and stimulate defense innovation. This strategy aims to strengthen NATO’s preparedness against long-term threats, especially from Russia, and counter persistent terrorism risks. The spending approach will be reviewed in 2029, allowing for adjustments based on the evolving strategic landscape.

The United States, under the Trump administration, is expected to align its defense budget planning with the NATO commitment, potentially affecting discretionary federal spending in other areas. Some of the 5% allocation will include direct support for Ukraine’s defense, which NATO leaders stated contributes to the collective security of the alliance.

The declaration also emphasized the need to eliminate defense trade barriers and foster industrial cooperation across the Atlantic. This could open new opportunities for American defense contractors and innovators, while increasing coordination with allied nations on production and technology development.

Article by multiple contributors, based upon information from The Hague Summit Declaration, North Atlantic Council, June 25, 2025

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