NATO Spending Hits a Record High

In 2024, the NATO alliance will spend more than $1 trillion collectively on defense. 

Obviously, the United States will account for most of that with an $886 billion defense budget. 

That exceeds the combined total of the next 10 spenders — China, Russia, India, Saudi Arabia, the U.K., Germany, France, South Korea, Japan, and Ukraine. 

However, even setting the U.S. aside, NATO is still on track to spend more on defense this year than at any point in its history.

That is NATO Europe will spend a combined $380 billion dollars in defense this year. 

Additionally, a record number of NATO members (18 of 31) will hit the alliance’s oft-stated target of 2% of GDP.

As a result, America’s allies in Europe will spend 2% of their combined GDP on defense for the first time ever this year.

That’s a massive leap — a sixfold increase, in fact, from 2014 when just three of America’s European allies hit their mark.

That 2% guidance, by the way, was first established in 2006. Though at the time, not even the group’s leadership took it seriously, as its spokesperson cautioned that it wasn’t a “hard commitment that they will do it,” but rather “a commitment to work towards it.”

Few it seems actually did. 

Until 2014, that is, when Russia invaded Ukraine the first time, annexing Crimea.

That same year the alliance adopted the Defence Investment Pledge, which not only reinforced the 2% target, but also called on members to spend 20% of their defense budgets on major equipment, including R&D.

Still, it was unquestionably Russia’s aggression that prompted the renewed commitment to defense spending that’s now carried the group beyond even Cold War levels.

Unsurprisingly, the countries bordering Russia have generally been the most dedicated to reaching their spending target – often going above and beyond. 

Poland, for example, now spends 4% of its GDP on defense, up from 1.9% in 2014.

In fact, every single NATO country that borders Russia and/or Ukraine now spends more than 2% of its GDP on defense. 

That includes:

• Estonia — 2.73%
• Latvia — 2.27%
• Lithuania — 2.54%
• Slovakia — 2.03%
• Hungary — 2.43%
• Romania — 2.44%
• And Finland (ratified as a member last April) — 2.45%

Furthermore, even the countries falling short of the 2% target are for the most part closing in. 

Italy, Portugal Czechia, Germany, Denmark, Norway, and the Netherlands all spend 1.5—1.7% of their GDP on defense, leaving just Canada (1.4%), Slovenia (1.3%), Turkey (1.3%), Spain (1.3%), Belgium (1%), and Luxembourg (0.7%) spending less.

So, to be clear, any inference that our NATO allies are falling short of their obligations is misguided at best and willfully misleading at worst.

Administratively NATO is funded by all of its alliance members based on a cost-sharing formula based on each country’s GDP. (The U.S. currently pays about 16.2% — the same as Germany.) 

Any assertion to the contrary is patently false.

Especially since, as I just explained, NATO spending, including spending among our European allies, is at an all-time high. The overwhelming majority of NATO members spend something close to 2% of their GDP on defense, if not more.

And that is in line not just with NATO’s suggested guidelines but higher spending throughout the world.

Indeed, global military spending surged by 9% in 2023 to a record $2.2 trillion, according to the International Institute for Strategic Studies.

Even Switzerland, famous for its neutrality, is determined to boost its defense spending by 19% over the next four years, citing a rise in global instability.

And that should tell you something about the way things are trending — and where you should be invested.

If you’re smart you’ll check out my latest report on cutting-edge defense technology here.

Fight on,

Jason Simpkins