António Costa, president of the European Council, said in a recent interview that he expects NATO members’ new 5 percent defense spending pledge to help pave the way for a trade agreement between the United States and the European Union.
In an interview with The Wall Street Journal, Costa said European countries will be buying more U.S. arms, thereby reducing the trade deficit — a key sticking point for President Trump as America and the 27-country bloc seek to strike a deal by July 9.
“Of course, a large part of this 5 percent will be spent for sure buying American, and it helps to rebalance the trade relations,” Costa told the Journal about the new defense-spending pledge.
“This agreement in NATO paved the way to have an agreement as soon as possible on trade,” he added.
NATO leaders last week agreed to a massive hike in defense spending after facing significant pressure from Trump.
The 32 leaders issued a joint statement following the summit saying, “Allies commit to invest 5 percent of GDP annually on core defense requirements as well as defense- and security-related spending by 2035 to ensure our individual and collective obligations.”
“On defense, it’s solved,” Costa said to the Journal. “On trade, the point is we have a large imbalance in our relations.”
Pressure has increased in recent weeks as the U.S. and EU work to strike a trade agreement by July 9 that would avoid the 50 percent tariffs that Trump previously announced and subsequently delayed.
Trump has frequently criticized America’s persistent trade deficit with the European Union, which was a record $161 billion last year, according to the U.S. Commerce Department.
“If we invest more on defense and if we buy more American goods, of course, this has a positive impact” in reducing the trade deficit, Costa said to the Journal.
Not all European leaders agree with Costa’s expectation. French President Emmanuel Macron said last week that he hopes military spending will benefit European industries, the Journal reported.
“We have truly a European preference,” Macron said.