| NATO wrapped up two days of meetings in the Hague yesterday, with members of the security pact agreeing to one of President Donald Trump’s longtime demands. Bloomberg TV’s Oliver Crook examines the deal. Plus: America’s top consumer-sentiment economist says the vibes are off. If this email was forwarded to you, click here to sign up. We are, by now, used to Donald Trump upending concepts once believed to be permanent features of the political and economic landscape. For Europe, one of those was so sacred that much of the continent felt comfortable largely outsourcing defense to Washington—and instead spending tax revenue on things like affordable housing, public transit and universal health care. The concept is NATO’s Article 5, rendered in shorthand as “an attack on one is an attack on all.” For decades, members of the North Atlantic Treaty Organization have committed to spending 2% of their gross domestic product on defense. And for decades, most of Europe ignored that target, with many countries spending less than 1.5%. In his first term, Trump suggested it was time for the Europeans to step up, and during the 2024 election campaign he ratcheted up pressure, saying he “would encourage [the Russians] to do whatever the hell they want” to countries that don’t meet the target. This year, he moved the goalposts into the nosebleed seats and started talking more and more about setting the bar at 5%. Regardless of what the millions of Americans who recently took to the streets shouting “No kings!” might think, all the gilding and glitz at the White House do give the place a whiff of Versailles. And as the leaders of NATO’s member states gathered this week in the Netherlands, it felt as if the Court of Trump had arrived. Like any royal court, the lesser lights (sorry, Europe) must perform to win favor and keep him in the club. The pageant the Europeans appear to have settled on is that big, beautiful 5% number. On Wednesday, Europe’s NATO members said they would commit to that—blowing the old 2% target out of the water.  Trump in the Hague with Secretary of State Marco Rubio. Photographer: Nicolas Tucat/AFP/Getty Images OK, it isn’t really 5% of GDP. Traditional military spending (that is, guns and ammo) will account for 3.5%, while the remaining 1.5% can be more flexible, going toward stuff like cybersecurity and infrastructure that might also serve for shipping military hardware. So as finance ministers engage in their fiscal wizardry, recategorizing planned outlays as defense spending, brace yourself for endless debates about what can or can’t be crammed into the military budget. They’ve also settled on a very generous timeline to reach that target—2035—which doesn’t much please NATO members closer to Ukraine. And some countries are already looking for exemptions. Spain, for instance, spent less than 1.3% on defense last year and says it won’t get higher than 2.1% anytime soon. Trump responded by threatening to double tariffs on the country. But let’s also not undersell it. Finland is one of NATO’s newest members and has its longest land border with Russia. President Alexander Stubb told me moments after the agreement was ratified that if you’d told him a few years ago that Finland would be spending 5% of GDP on defense, “I would have said go see a doctor. But here we are.” For how long will Europe’s pleas and pledges please the would-be King of NATO? It’s worth noting that 3.5% is already more than double the European average over the past 10 years. So if the Europeans offer a clear roadmap of how they’ll hit 5%, and much of the spending goes toward US-made materiel (at least in the short term), Trump might well nod benevolently at the Old World’s new commitment. But the White House has been floating the idea of calling home tens of thousands of the 80,000-plus US military personnel stationed in Europe to focus on the Pacific. The Dutch defense minister, for one, says he’s expecting the US to scale back its forces in Europe. Many things remain unclear: To stand on its own militarily, Europe must cough up trillions of euros. But can it do that without angering voters? Can European companies scale up production of the armaments they need? And what does a true European collective defense look like from an operational perspective? At least on thing’s clear: This time the disruptor-in-chief got the big, beautiful number he so coveted. | 
