A dramatic shift in Europe’s defense commitments isFraming a new balance in transatlantic ties: NATO’s decision to lift its ally-defense-spending target is being framed by EU leaders as not only a security decision but a economic and strategic pivot that could steer more European purchases toward the United States. EU Council President Antonio Costa told CNBC that the move addresses the primary trade-related friction between Europe and the United States and sets a course where defense and trade are interlinked rather than treated as separate arenas. He stressed that strengthening Europe’s own defense responsibilities also helps unlock progress on other bilateral issues, signaling a broader reorientation of how Europe and the U.S. manage burden-sharing and market access. Costa’s remarks come amid a backdrop of ongoing U.S.-EU efforts to avert tariff-escalation pressure, with Washington signaling flexibility on tariff timelines while European negotiators weigh a new U.S. proposal. The conversation captured Costa’s view that the defense agreement is a “big win” in the sense that it rebalances responsibility and potential economic ties, including a possible uptick in American-origin defense procurement by Europe as part of the broader realignment. The following sections provide a detailed breakdown of the NATO decision, the economic and trade implications, the tariff negotiations in play, and Costa’s framing of the issue as a combined defense-trade challenge and opportunity.
NATO’s spending target: what changed, why it matters, and how it’s sold
The core development is NATO allies’ agreement to more than double their defense spending target—from 2% of gross domestic product to 5% by 2035. This is framed by officials and leaders as both a strategic realignment and a response to evolving security demands across the alliance’s perimeter. The shift is presented not merely as a numbers game but as a signal of renewed commitment to collective defense and to the credibility of Europe’s military capacity within the transatlantic framework. Costa, who led Portugal as prime minister until last year, emphasized that the decision aims to strengthen Europe’s position and to assume greater responsibilities for its own security. In his reading, boosting defense outlays constitutes a foundational step that clears the path to addressing other long-standing issues between Europe and the United States.
The timing and pace of the 5% target are designed to reflect the need for sustained investment in defense over a multi-decade horizon, culminating in a concrete 2035 deadline. The negotiation — both within European capitals and in dialogue with Washington — centers on how Europe can responsibly increase spending while ensuring that the purchases and procurement flows align with shared strategic objectives. Costa’s framing stresses that this move is not only about higher budgets but about strategic alignment: a deliberate strengthening of Europe’s own defense posture, paired with a redefined approach to transatlantic collaboration. The overarching thesis presented by Costa is that once Europe bolsters its defense capabilities, the region becomes better positioned to engage in broader negotiations with the United States, including trade, industrial policy, and reciprocity measures. In short, the 5% target is depicted as a milestone that signals a deeper, more integrated approach to security and economic ties in the years ahead.
This reshaping of defense commitments also carries implications for how Europe partners with the United States on defense procurement. Costa noted that a portion of higher defense spending could be directed toward purchasing American-made equipment and technology. This “buy American” dimension is presented as a natural outgrowth of the defense target, with the logic that stronger European demand for American weapons and related goods can help rebalance bilateral trade. The potential for increased American procurement is tied to the broader argument that defense negotiations naturally intersect with trade discussions. Costa’s position is that the two tracks are interdependent rather than separable: how Europe funds its defense can influence the terms and dynamics of trade talks with Washington, and vice versa. The practical implication is that European defense modernization could be supported in part by U.S. suppliers, reinforcing the economic channel of the alliance alongside the security one.
The defense spending expansion is also viewed through the lens of burden-sharing, an enduring concept in NATO that has often been criticized as uneven or insufficiently fulfilled by some allies. Costa echoed the shared understanding that Europe must do more to shoulder its defense responsibilities, thereby reinforcing the alliance’s strategic autonomy while maintaining confidence in the transatlantic partnership. In this reading, the shift from 2% to 5% serves as a tangible signal that Europe is serious about its commitments, potentially easing tensions with the United States and reducing the leverage that the U.S. might otherwise feel in defense and security negotiations. As Costa framed it in his CNBC interview, by strengthening its own capabilities and contributing more heavily to defense, Europe can lay the groundwork for more effective negotiations across other policy fronts, including trade and industrial collaboration. The result, from his vantage point, is a more balanced relationship in which Europe’s increased defense spending substantiates both regional security and transatlantic economic ties.
This section thus frames the NATO decision as a multi-dimensional policy move: it aims to elevate Europe’s strategic autonomy, reassure allies of resilience in a shifting security environment, and set the stage for more integrated discussions about how defense and trade policies interact in practice. The 5% target by 2035 symbolizes a deliberate, long-range commitment to upgrading Europe’s defense posture while signaling to partners that European taxpayers and policymakers are prepared to sustain higher levels of investment in security. In Costa’s words, this is about strengthening Europe’s position and ensuring that Europe bears greater responsibility for its defense, which in his assessment is a prerequisite for solving other, related issues within the transatlantic relationship.
Economic implications: how defense spending and potential procurements reshape trade dynamics
A central thread in Costa’s remarks is the linkage between increased defense spending and potential shifts in trade patterns, particularly toward American suppliers. He argued that higher defense outlays could translate into greater purchases from the United States, which, in turn, would contribute to a rebalancing of trade relations between Europe and the United States. The logic he presented is straightforward: if Europe is spending more on defense and chooses to source more of its equipment and technology from the United States, the bilateral trade balance in defense-related goods can tilt more favorably toward the United States. This is framed not as a mercantilist push but as a natural extension of the defense commitments that Europe has undertaken as part of the NATO alliance and the broader security architecture. In this framing, procurement choices become a direct instrument of policy that supports both European security and U.S. industrial interests.
The idea that defense procurements and trade negotiations are inseparable has been long a feature of broad discussions about transatlantic economic relations. Costa’s assertion that defense and trade negotiations cannot be separated is a direct challenge to a more compartmentalized approach to policy. He argues that resolving the main trade issue requires recognizing how defense commitments influence commercial relationships and vice versa. By connecting the two domains, the European side signals a readiness to pursue a compatible and interdependent set of outcomes: Europe pays more for its defense capabilities and, in return, secures better access to American defense technologies and capabilities. The consequence, as framed by Costa, is the establishment of a virtuous cycle in which stronger European defense capabilities reinforce trust and cooperation with the United States, thereby facilitating more favorable trade terms for European industry while ensuring a robust U.S. supply chain for military equipment.
Costa’s comments also touch on political optics and strategic messaging around “buy American.” The phrase implies not merely a preference for U.S.-made goods but a deliberate alignment of defense spending with procurement choices that bolster American industry. The potential effect is a shift in procurement patterns within Europe, with potential concentration on U.S.-produced platforms, missiles, electronics, and other defense products. This has broader implications for European defense ecosystems, including how European manufacturers adapt to competition, how national procurement policies align with EU-wide rules, and how the European defense-industrial base evolves in response to changing market dynamics. The message is that Europe’s defense modernization could be financed in part by increased U.S. sales to European buyers, creating a more integrated transatlantic defense market with shared standards, interoperability, and synergies that support both sides of the Atlantic.
From an economic perspective, the proposed redistribution of demand toward American suppliers would have ripple effects across European economies. European buyers could experience improved access to advanced U.S. systems and established supply chains, potentially delivering efficiency and capability benefits that support interoperability with U.S. forces and allied partners. For the United States, this would translate into a secure and expanding export market for defense products, reinforcing the strategic relationship and potentially contributing to U.S. industrial policy goals. At the same time, European governments must balance procurement choices with considerations of domestic industrial policy, technology transfer, and the long-term health of Europe’s own defense-industrial ecosystem. These considerations include how Europe can strengthen local suppliers, maintain critical capabilities, and ensure that increased reliance on foreign suppliers does not undermine resilience or strategic autonomy. Costa’s framing, therefore, positions the defense spending expansion as a lever that can drive meaningful, positive outcomes for both sides of the Atlantic, provided that procurement decisions remain grounded in strategic alignment, interoperability, and mutual economic benefit.
The broader implication is that Europe’s shift toward higher defense spending and potential increased American procurement can become a catalyst for a deeper, more integrated transatlantic market for defense products and services. The interplay between defense commitments and trade outcomes could shape industrial policy debates within EU institutions and member states, influencing purchasing priorities, supplier diversification, and the development of common standards across Europe. If realized, the vision could contribute to a more resilient, capable, and interoperable NATO force, underpinned by an economic architecture that rewards collaboration and shared capabilities. Costa’s emphasis on rebalancing and mutual gains highlights a strategic logic that connects security commitments with economic policy, inviting a comprehensive approach to managing risk, competitiveness, and alliance cohesion in the years ahead.
The July tariff deadline and the trajectory of US-EU trade talks: where negotiations stand
A major backdrop to Costa’s CNBC interview is the broader US-EU effort to reach a trade agreement ahead of the July deadline for potential reciprocal tariffs on imports from nearly all countries. The European Union and the United States have been working through a set of proposals and counterproposals in a context where both sides are keen to avoid escalation that could undermine the alliance’s political cohesion and the economic recovery momentum. This week, the United States presented the European Commission with a new proposal, a development that has kept markets and policymakers attentive to how negotiations might unfold in coming weeks. The change in tone and the signaling from Washington have contributed to a sense that a path toward a resolution remains possible, even as the July deadline approaches and the risk of tariff reinstatement remains a live policy lever.
The economic mood in markets had improved in response to the White House’s statements about tariff restart timelines. Karoline Leavitt, the White House Press Secretary, stated that the deadlines for restarting tariffs on certain nations were “not critical.” This phrasing suggested that Washington was prepared to consider extensions or adjustments to the schedule, weighing strategic considerations alongside domestic economic and political concerns. The president would retain decision-making authority on whether to extend, modify, or maintain the tariff timetable, reflecting the political complexity and the potential consequences of any move in trade policy. Leavitt’s remarks contributed to a sense of flexibility in the U.S. stance, which European negotiators could interpret as room to maneuver in delivering a mutually acceptable compromise. For Europe, the message from Washington—coupled with heavy industry and business community interests—underscored the importance of delivering a credible trade offer that aligns with Europe’s defense commitments and industrial capabilities.
Costa indicated that the European Commission is actively evaluating the White House’s trade proposal as part of a broader process to determine whether a deal can be reached before the July deadlines. He stressed that both sides are highly engaged in negotiations and that there is genuine hope of achieving an agreement by July 9. This framing places emphasis on a shared sense of urgency while acknowledging the complexity of aligning two large and diverse economies with deeply integrated but sometimes competing interests. The EU’s approach involves thorough assessment of the U.S. proposal, ensuring that any final agreement would maintain Europe’s strategic autonomy, protect sensitive sectors, and enable a fair and durable balance of benefits across both sides. Costa’s comments reflect a cautious optimism, recognizing the potential for progress while also highlighting the need for careful calibration of concessions, protections for European industries, and a clear path to enforcement and compliance.
The July deadline has functioned as a focal point for dialogue among policymakers, traders, and industry. For stakeholders in Europe, the question has been how any prospective arrangement would handle issues such as tariff elimination or reduction, rules of origin, agricultural exemptions, and sectors with sensitive strategic relevance. The dynamic is delicate: a deal could unlock important market access and reduce friction, but it would need to be robust enough to withstand political pressures in both the EU and the United States. Costa’s recent remarks imply a belief that a solution is within reach, provided both sides stay engaged and are prepared to negotiate in good faith. The ultimate outcome remains contingent on how the White House’s forthcoming decisions align with the European Commission’s assessment and the broader security and economic objectives driving the transatlantic partnership.
Costa’s stance and its implications for EU leadership in NATO and trade policy
Antonio Costa’s comments reflect a nuanced perspective on how Europe should approach its dual role as a security partner and a major trading partner with the United States. He framed the defense-spending decision as a significant political achievement that can be described as a “big win” in the ongoing dialogue about burden-sharing and alliance resilience. By tying defense commitments to broad economic considerations—especially procurement choices and potential U.S.-supplied equipment—Costa presented a vision where security policy and economic policy reinforce each other. This perspective aligns with the broader European objective of reinforcing strategic autonomy while preserving a strong, cooperative relationship with the United States as a cornerstone of the transatlantic order.
Costa’s status as a former prime minister of Portugal and a current EU leader lends weight to his interpretation of the NATO decision as a turning point in transatlantic relations. His leadership position underscores the importance that European capitals place on a credible and coherent approach to security and trade policy, particularly in the context of ongoing discussions about defense investment, industrial policy, and market access. By positioning the 5% target as an instrument to strengthen Europe’s negotiating leverage, Costa signals a strategic emphasis on aligning Europe’s internal budgets and external policy objectives, thereby presenting a united front that can facilitate consensus among EU member states. The interview also highlights the role of EU leadership in shaping how Europe communicates and negotiates with Washington, seeking to translate security commitments into tangible economic outcomes while safeguarding Europe’s strategic interests.
The political implications of Costa’s framing extend to how the EU engages with NATO and with the broader strategic landscape in which defense and trade policy intersect. If the defense spending shift acquires momentum, it may influence the tone and tempo of EU diplomacy, with Costa and other leaders advocating for clear, consistent messaging that emphasizes interoperability, fiscal responsibility, and the value of a strong, integrated defense-industrial base across Europe. The emphasis on “not separable” negotiations—defense and trade—anticipates a future in which policy dialogues increasingly occur in a holistic, cross-disciplinary framework rather than in silos. This approach could shape how Europe marshals its economic and security assets to respond to evolving global challenges and how it negotiates with partners on the world stage.
The commentary underscores the delicate balance EU leaders must strike between ambition and realism. On one hand, there is a clear imperative to demonstrate a robust commitment to defense, to bolster transatlantic security, and to pursue reforms that can generate reciprocal economic benefits. On the other hand, European governments must manage domestic political constraints, protect key industries, and ensure that defense spending translates into genuine capability gains and operational readiness. Costa’s statements point to a strategic philosophy that seeks to harmonize these objectives, presenting Europe as a steadfast, forward-looking partner that can contribute to a stronger and more balanced transatlantic partnership without sacrificing its own strategic interests or economic sovereignty.
Looking ahead: what might come next for the transatlantic balance of security and commerce
With NATO’s decision and the ongoing US-EU tariff dialogue, several plausible trajectories could unfold in the months ahead. If the 5% target by 2035 proceeds on schedule and European defense procurement increasingly channels toward American suppliers, a redefined transatlantic economic-security matrix could emerge. Such a matrix would feature closer interoperability of defense systems, heightened cooperation in industrial policy, and potentially a more symmetrical balance in how the costs and benefits of alliance commitments are distributed across the Atlantic. It would also place renewed emphasis on shared strategic objectives, including modernization of defense capabilities, resilience against emerging security threats, and the stabilization of trade relations in a climate where economic and security imperatives increasingly converge.
Conversely, if resistance to higher defense spending persists within one or more EU member states, or if domestic political pressures intensify against greater reliance on external suppliers, the envisioned rebalancing could face headwinds. In such a scenario, Europe might pursue a more diversified procurement strategy, seeking to preserve domestic industrial capacity and ensure resilience in supply chains. The dialogue around “buy American” would require careful calibration to avoid over-dependence on a single supplier base while still reaping the security and economic advantages of interoperability with U.S. forces. In this path, negotiations with the United States could shift toward more nuanced arrangements that balance national interests with collective European objectives, including the need for a vibrant, competitive European defense-industrial sector that can partner with U.S. suppliers where appropriate without compromising strategic autonomy.
The July tariff negotiations will remain a critical pressure point in the near term. A successful accelerator of a deal by early July could reinforce a sense of momentum and mutual confidence, enabling both sides to move forward on a shared set of outcomes that align defense commitments with trade rules and industrial cooperation. If negotiations stall, there could be renewed concerns about tariff escalation that would complicate the security partnership and potentially dampen investor and market sentiment. Costa’s framing of the issue as interdependent—where defense spending, procurement choices, and trade policy feed into one another—signals a belief that the most durable solutions arise from a comprehensive, integrated approach rather than siloed policy adjustments.
In sum, the intersection of NATO defense spending, Europe’s security posture, and the trajectory of U.S.-EU trade talks defines a complex policy space in which security and economics reinforce each other. Costa’s keynote position emphasizes that strengthening Europe’s defense capacity is not an isolated objective but a strategic instrument that can empower Europe in trade discussions, influence procurement patterns, and shape the broader transatlantic alliance. The coming months will reveal whether this integrated framework can be translated into concrete policy outcomes that satisfy both sides of the Atlantic and deliver durable benefits for European safety, economic resilience, and strategic autonomy within a shifting global order.
Conclusion
NATO’s decision to raise the defense spending target to 5% of GDP by 2035 is presented by EU Council President Antonio Costa as a strategic pivot that strengthens Europe’s security posture while facilitating a deeper, more balanced economic relationship with the United States. Costa argues that the move does not stand alone; it is intrinsically linked to trade questions, particularly the potential revival of American-procured defense equipment within Europe, which could rebalance bilateral trade dynamics. He also notes that defense and trade negotiations are intertwined, suggesting that progress in one area may catalyze progress in the other. The broader context includes ongoing U.S.-EU tariff discussions with July deadlines and signals from U.S. officials indicating flexibility on timing, which could influence the ease with which a comprehensive agreement is reached.
The coming period will test whether Europe’s increased defense spending can translate into stronger, more interoperable capabilities and whether defense procurement choices will align with broader economic and strategic objectives. Costa’s articulation of a “big win” in terms of burden-sharing and transatlantic cohesion reflects a leadership stance aimed at reinforcing both security commitments and economic partnerships. If the expected alignment holds, Europe may see greater leverage in trade conversations and more integrated defense-industrial collaboration with the United States, contributing to a more resilient transatlantic alliance that can adapt to evolving geopolitical challenges while supporting shared prosperity.