NATO allies are increasing defense spending to levels not seen since the Cold War, following pressure from U.S. President Donald Trump and the ongoing conflict in Ukraine. NATO leaders have agreed to aim for a defense spending target of 5% of GDP by 2035. Countries bordering Russia, such as Poland, Estonia, Latvia, and Lithuania, have significantly increased their military budgets. Germany has initiated a major rearmament effort with a special fund of 100 billion euros for its military.
According to NATO's latest annual report, European allies and Canada raised defense spending by 20% in 2025 compared to the previous year, contributing hundreds of billions of dollars since 2014. However, experts warn that increased spending does not immediately translate to military capability. Jim Townsend, a former deputy assistant secretary of defense, noted that while defense budgets indicate political commitment, they do not reflect the readiness of military forces or the ability to sustain combat operations.
The war in Ukraine has highlighted the limitations of NATO's defense capabilities, as countries face challenges in replenishing stockpiles and producing necessary military equipment. Townsend emphasized that both European and U.S. defense industries have diminished over the years, complicating the ability to meet increased demands for military production. A recent analysis indicated that structural constraints in Europe’s defense sector could hinder the transition from increased spending to enhanced military capabilities. As a result, some NATO countries are seeking alternative suppliers, such as South Korea, to expedite military procurement.