In an innovative way, U.S. President Donald Trump is using tariffs as a sanctions mechanism against opponents and competitors in the international system to achieve objectives related to security and defense issues. For example, he did so against Spain when it was warned at the Hague Summit about its failure to comply with increasing military spending. Later, Trump used the same tactic to pressure Russia to stop the war in Ukraine. In the same context, he insisted that China should review its investments related to U.S. national security.
Trump’s approach represents a newly established mechanism for deterrence and sanctions. Regardless of the economic motivations and consequences of tariffs, they have now become a tool to deter NATO allies from reducing their defense spending. He also uses them to exert strategic pressure on Russia and China within what is known as the triad-based economic policy (Economy, Security, Diplomacy).
Linking Defense Spending and U.S. Tariffs:
1. NATO Defense Spending and Tariffs:
At the NATO summit held in The Hague (June 25, 2025), President Donald Trump demanded that alliance members raise their defense spending to 5% of their GDPs by 2035. He threatened Spain with “double” tariffs to compensate for its shortfall after Madrid announced it would increase spending, but below the U.S.-declared target. Notably, Spain has the lowest military spending as a percentage of GDP among NATO members, standing at just 1.24%.
The Hague Summit Declaration included the agreement of all 32 NATO members, including Spain, to raise military spending to the level demanded by the U.S. president. Thus, Trump’s method proved successful. Several reports covering the summit’s behind-the-scenes negotiations indicate a general trend among members not to oppose Trump’s demand due to the potential consequences of doing so.
According to NATO’s latest annual spending index for 2024, U.S. military expenditure reached around $967 billion, equivalent to 3.38% of its GDP. NATO data shows the U.S. contributes approximately 66% of the alliance’s defense budget. This justifies Trump’s stance urging other members to increase their contributions. U.S. defense spending is about 42 times greater than Spain’s, whose defense budget for the same year stood at approximately €19.7 billion (≈ $22.9 billion), which equals 1.24% of its GDP.
Given this context, several issues arise regarding NATO members’ commitment and ability to meet their spending pledges. But another question emerges: How can the link between NATO defense spending and the revenues from U.S. tariffs on non-complying countries be established? In other words, will the proceeds from these tariffs be allocated to NATO’s budget? And how will that happen? These questions are crucial at this point in time and rest on the assumption that there will be a connection between NATO defense spending and tariff revenues, by directing part of the new customs revenues toward funding security commitments through congressional allocations in the federal budget. This can be clarified as follows:
- Tariff Revenue Generation Mechanism: The U.S. federal government collects tariffs on imports, which go into the General Fund of the U.S. Treasury. These revenues exceeded $100 billion since the start of fiscal year 2025 and are expected to reach $300 billion by year’s end, making them the fourth-largest source of federal income (accounting for about 5% of total revenues).
- Defense Spending Allocation Process: There is no automatic mechanism transferring these revenues to NATO’s defense budget. Congress approves an annual budget that allocates specific shares of the General Fund to the Department of Defense (DoD) or to NATO-related programs. In other words, the president or the treasury secretary can propose using part of tariff revenues to support NATO, but this requires congressional legislation specifying the size and legal framework of such an allocation in the budget.
Despite the legal and political justifications put forward, practical application reflects a level of underlying tension between the U.S. and its allies, viewed more as a commodification of security and defense than as a partnership based on shared defense policies—despite the principle of burden-sharing.
2. Targeting Russia and China:
Trump linked his orders regarding additional trade sanctions on imports from Russia’s trade partners to the requirement of ending the war with Ukraine within 50 days, threatening to impose tariffs of up to 100% on Russian oil and gas imports routed through third parties. This was coupled with a plan to send Patriot missile systems to Kyiv via NATO.
Trump’s decision also brought China into the equation. Using this mechanism, he relied on Section 232 of the Trade Expansion Act of 1962 to impose 25% tariffs on steel and 10% on aluminum imports from China in March 2018, justifying the move as protecting national security from “critical mineral supply threats” and curbing what he described as dumping and intellectual property theft.
This approach serves two main goals: First, redistributing the defense burden within NATO and reducing U.S. financial dependency; second, targeting funding sources for Russia’s military operations and imposing constraints on the growth of China’s defense-related industrial capabilities.
Furthermore, the decision is likely to have geopolitical effects on Russia. Imposing tariffs on energy imports could shrink Kremlin military revenues, though it may simultaneously prompt Moscow to respond with broad retaliatory measures, including counter-tariffs—even though current trade volumes are too limited to be economically impactful.
As for China, the expansion of Section 232 investigations to include new sectors such as semiconductors and critical minerals sends a clear message to Chinese leadership to reconsider investment and technology policies tied to U.S. national security.
Trump’s Interference in NATO Members’ Defense Policies:
The extreme complexity in the relationship between economic tools on one hand and political/security tools on the other makes evaluating Trump’s new direction and its outcomes a risky and difficult task. Moreover, the heavy overlap in tools Trump has consistently used to achieve his goals—during both his first and second terms—further complicates this assessment.
Additionally, although Trump has declared that the revenues collected from tariffs imposed on NATO members who fail to raise defense spending will go to the alliance’s budget, this should not be taken as a given. There are several considerations, foremost being Trump’s own character, which is known for unpredictability and frequent reversals of decisions and promises. Furthermore, while part of the tariff revenue may indeed go to the U.S. defense budget, this is an internal American matter and cannot be relied upon to judge the possibility of redirecting the new tariff revenues to NATO’s budget.
Trump’s new approach within NATO once again demonstrates his willingness to use economic tools to achieve political aims. Most importantly, even if Trump is truthful about directing the collected funds to NATO, and even if that is successfully passed through the U.S. legislative mechanisms, the money would most likely count as part of the U.S. contribution to NATO’s budget—not as funds attributed to the countries whose products were targeted by the tariffs. This would mean more American influence and interests within the alliance, using non-American funding—or at least alternative funding sources—to support America’s share, even if the overall contribution level remains the same.
Trump’s approach moves the use of tariff policy into new territory. Initially, tariffs were mostly directed at countries deemed enemies like North Korea, Iran, and somewhat Russia, or economic rivals like China. Now, they are aimed at allies—even military allies—despite military alliances being among the highest forms of interstate cooperation. Trump’s new strategy also expands tariff use into deterrence and defense policies. More precisely, it exerts pressure on allies to change their domestic policies related to deterrence and defense in line with American preferences. This is unprecedented, representing a quasi-direct intervention—via economic tools—in shaping defense policies, one of the most sensitive and sovereign areas for states.
Profit, Loss, Success, and Failure:
Trump’s rise to power marked a turning point in U.S. politics, as he comes from a business background, inclining him to practice politics through economic means based on profit and loss. His populist nature leads him to adopt nationalistic, inward-looking policies in governing, exemplified by the “America First” slogan. Trump’s new NATO strategy can be understood in this light. Two opposing views emerge in this context: the first sees Trump as willing to use any means against any party to secure American interests regardless of the consequences; the second believes that although Trump may threaten NATO members, it’s unlikely he would ultimately treat them the same way he deals with China and Russia.
Expected Outcomes:
If historical experience has often shown that economic sanctions fail to achieve their intended goals—and given various constraints like the strength of the targeted economies, the size and diversity of their markets, strong payment balances, strong national currencies, and the extent of international participation in sanctions—then Trump’s new approach toward NATO allies may face serious challenges in achieving its objectives.
Even though Trump’s strategy has an economic nature, it signals a turning point in NATO’s decision-making mechanisms. While member states may have yielded to Trump’s pressure, this doesn’t guarantee they will all fulfill their commitments—mainly due to internal economic difficulties. Moreover, Trump’s pressure, combined with other members’ failure to meet their pledges, could cause a rift within the alliance, which would have serious implications for NATO’s future.
