NATO’s recent decision to substantially increase the defense spending targets of its member countries has significant implications for transatlantic trade dynamics. European Union Council President Antonio Costa expressed in an interview with Finance Newso on Friday that this shift will promote European investments in American military equipment and recalibrate trade relations with the United States.
This week, NATO allies concurred to elevate their defense spending commitment from 2% to 5% of their respective gross domestic products by the year 2035.
Costa noted that the arrangement addresses a fundamental trade concern between Europe and the U.S. during his discussion with Finance Newso’s Silvia Amaro.
“Our decision to enhance our defense capabilities underscores our commitment to take on more responsibilities,” he stated. “This effectively resolves the primary issue, creating a pathway to address remaining challenges.”
He indicated that a segment of the increased defense budget would be allocated toward purchasing U.S. military products.
“Investing more in American defense means a rebalancing of our trade relations,” Costa remarked, highlighting the intertwined nature of defense and trade negotiations. “This was a key concern for the United States, and it has been addressed.”
Costa, who served as Prime Minister of Portugal until last year, echoed former President Donald Trump’s characterization of the military agreement as a significant triumph, emphasizing that it helps to realign the burden-sharing framework concerning defense expenditures.
The EU is among various trading partners eager to finalize an agreement with the U.S. ahead of a proposed early July deadline for increasing reciprocal tariffs on imports from numerous nations.
This week, advancements towards a resolution were made after the U.S. presented a new trade proposal to the European Commission. Furthermore, the news from White House Press Secretary Karoline Leavitt, indicating that the July 8 and 9 tariff deadlines are “not critical,” has encouraged market optimism.
“There may be a possibility for an extension, but that’s ultimately the president’s decision,” Leavitt added.
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“Both sides are deeply committed to finding a solution, and I am optimistic that we will achieve this prior to July 9,” he concluded.
