"Twenty-three of the 28 member nations are still not paying what they should," Trump told heads of NATO states assembled Thursday in Brussels. "Many of these nations owe massive amounts of money from past years."
It's not the first time Trump has suggested other NATO members have a debt to pay.
But NATO does not keep a running tab of what its members spend on defense. Treaty members target spending 2% of economic output on defense -- but that is merely a guideline.
NATO members spend money on their own defense. The funds they send to NATO directly account for less than 1% of overall defense spending by members of the alliance.
Here's how it works:
National budgets
NATO is based on the principle of collective defense: an attack against one or more members is considered an attack against all. So far that has only been invoked once -- in response to the September 11 attacks.
To make the idea work, it is important for all members to make sure their armed forces are in good shape. So NATO sets an official target on how much they should spend. That currently stands at 2% of GDP.
The 2% target is described as a "guideline." There is no penalty for not meeting it.
It is up to each country to decide how much to spend and how to use the money.
Related: Trump criticized NATO spending. Here's what's really going on
Related: Germany's defense minister to Trump: No, we don't owe NATO money
The North Atlantic alliance has its own military budget worth 1.29 billion ($1.4 billion), which is used to fund some operations and the NATO strategic command center, as well as training and research. But it is miniscule compared to overall spending on defense by NATO countries, which NATO estimates will total more than $921 billion in 2017.
The alliance also has a civilian budget of 234.4 million ($252 million), used mainly to fund the NATO headquarters in Belgium, and its administration.
Spending is rising
Only five of NATO's 28 members -- the U.S., Greece, Poland, Estonia and the U.K. -- meet the 2% target.
The rest lag behind. Germany is set to spend 1.2% of GDP on defense this year, France 1.79%. Belgium, Spain and Luxembourg all spend less than 1%.
NATO has long been pushing for higher spending. At a summit in 2014, all members who were falling short promised to move toward the official target within a decade.
That pledge appears to be holding: The alliance as a whole increased defense spending for the first time in two decades in 2015.
And last year, 22 of 28 NATO members increased their defense budgets. If the U.S. is removed from the equation, the group increased its spending by 3.8% in 2016. Including the U.S., overall spending rose by 2.9%.
Fear of Russian aggression is driving some of the recent splurge. Latvia, which shares a border with Russia, increased its defense budget by 42% in 2016. Its neighbor Lithuania boosted its outlays by 34%.
The 2% problem
So why don't more countries spend 2% of GDP? Many experts point out that the target is problematic.
NATO has warned against a rush to spend for the sake of spending, emphasizing that budget decisions must be based on strategic planning. For example, it wants countries to spend 20% of their defense budgets on equipment.
Related: Lockheed Martin CEO promises Trump she'll cut F-35 costs
There's also pressure for more coordination of spending among European countries.
Some member countries simply don't have armies big enough to be able to absorb a huge increase in funding quickly -- that's why the 2014 summit pledge gave laggards until 2024 to do more.
NATO member Iceland, for example, doesn't have its own army and spends just 0.1% of its GDP on defense, according to the Organization for Economic Co-operation and Development.
And the 2% target doesn't just cover spending on defense to meet NATO commitments. The money can be used to fund other activities such as European peace missions in the Central African Republic and Mali, as well as national missions that are not part of NATO operations, for example the fight against ISIS.
CNNMoney (London) First published May 25, 2017: 11:55 AM ET
See more here:
NATO funding: How it works and who pays what
- NATO Protesters Receive 5- To 8-Year Prison Terms - April 26th, 2014 [April 26th, 2014]
- NATO - Wikipedia, the free encyclopedia - April 26th, 2014 [April 26th, 2014]
- Latvia: US troops arrive in Baltics for NATO drill - Video - April 26th, 2014 [April 26th, 2014]
- No NATO. May 2012. Archive. Chicago, Il - Video - April 26th, 2014 [April 26th, 2014]
- Erkkio Tuomioja: "Nato suojaa Suomea meteoriiteilta". - Video - April 26th, 2014 [April 26th, 2014]
- US troops arrive in Latvia for NATO exercises: Baltic states concerned by Russian military threat - Video - April 26th, 2014 [April 26th, 2014]
- Voglio andare a vivere a Laveno dove e' nato Pozzetto - Video - April 26th, 2014 [April 26th, 2014]
- OcaqTv - Rusiya NATO srhdini pozdu -- F-16-lar havaya qalxd - Video - April 26th, 2014 [April 26th, 2014]
- Men of War Assault Squad Cold War Mod - NATO vs Warsaw Pact - Video - April 26th, 2014 [April 26th, 2014]
- US troops in Poland: American soldiers arrive for NATO exercises in response to Russia threat - Video - April 26th, 2014 [April 26th, 2014]
- Ancona 23-04-14 PdCI - La crisi dell'Ucraina, la NATO e l'UE: pericoli di guerra e lotta x la Pace - Video - April 26th, 2014 [April 26th, 2014]
- Eastermonday Peace ralley NATO Bchel germany 21.04.2014 - Video - April 26th, 2014 [April 26th, 2014]
- How to change Gear 2 Strap NATO no tool needed - Video - April 26th, 2014 [April 26th, 2014]
- In Context: The War Report #3 - Ukraine and NATO - Video - April 26th, 2014 [April 26th, 2014]
- On The Wrist Omega Speedmaster Black NATO Strap - Video - April 26th, 2014 [April 26th, 2014]
- US, NATO expanding on Russia doorstep: Analyst - Video - April 26th, 2014 [April 26th, 2014]
- NATO War Games Send Warning to Moscow - Video - April 26th, 2014 [April 26th, 2014]
- NATO to deploy recon flights over Poland - April 27th, 2014 [April 27th, 2014]
- Nato News - April 27th, 2014 [April 27th, 2014]
- NATO - State - April 27th, 2014 [April 27th, 2014]
- NATO: Definition from Answers.com - Answers - The Most ... - April 27th, 2014 [April 27th, 2014]
- Marine Le Pen: Vyvediem Franczsko z NATO - francztina, rutina - Video - April 27th, 2014 [April 27th, 2014]
- 5 NATO troops killed in Kandahar Afghanistan UK's helicopter crash - Video - April 27th, 2014 [April 27th, 2014]
- European observers detained in Ukraine are branded 'Nato spies' - Video - April 27th, 2014 [April 27th, 2014]
- Prostittas priecjas par NATO karavriem Latvij - Video - April 27th, 2014 [April 27th, 2014]
- MV Bill - A Luz #PersianaBaixaMix (prod. DJ Nato pk) Part. @KmillaCdd - Video - April 27th, 2014 [April 27th, 2014]
- Furious Russia Proposes Retaliation Against NATO Countries! - Video - April 27th, 2014 [April 27th, 2014]
- Conversation: NATO's Evolving Mission - Video - April 27th, 2014 [April 27th, 2014]
- NATO supply trucks stuck in Pakistan - Video - April 28th, 2014 [April 28th, 2014]
- NATO troops killed in Afghanistan helicopter crash - Video - April 28th, 2014 [April 28th, 2014]
- Slovakia: NATO exercises in Central Europe - Video - April 28th, 2014 [April 28th, 2014]
- "NATO 3" individuals sentenced - Video - April 28th, 2014 [April 28th, 2014]
- NATO exercise scenario: Naval response to invasion of allied country - April 29th, 2014 [April 29th, 2014]
- NATO News and Video - FOX News Topics - FOXNews.com - April 29th, 2014 [April 29th, 2014]
- RAF Typhoons Arrive in Lithuania to Reinforce NATO Air Policing Mission - Video - April 29th, 2014 [April 29th, 2014]
- Poland: French Rafale fighter jets join NATO force - Video - April 29th, 2014 [April 29th, 2014]
- RAF Deploys Typhoon Jets To Bolster Nato Air Policing Mission - Video - April 29th, 2014 [April 29th, 2014]
- Sunday 4/27/2014 - Tarpley Points Out Fake-OSCE Observers Are Actually NATO Military Officers - Video - April 29th, 2014 [April 29th, 2014]
- Germany: Pro-Russians rally against NATO in Frankfurt - Video - April 29th, 2014 [April 29th, 2014]
- April 28 2014 Breaking News NATO minesweepers set off on Baltic deployment - Video - April 30th, 2014 [April 30th, 2014]
- NATO forces serve world bankers: Analyst - Video - April 30th, 2014 [April 30th, 2014]
- 2 NATO troops killed in attack in eastern Afghanistan - Video - April 30th, 2014 [April 30th, 2014]
- STEFANO BORGONOVO:ATTACCANTE NATO IL DOCUMENTARIO - Video - April 30th, 2014 [April 30th, 2014]
- RAF Deploys Typhoon Jets To Bolster NATO Air Policing Mission - May 1st, 2014 [May 1st, 2014]
- NATO opens second Baltic air base in Estonia with 4 Danish fighter jets amid Ukraine crisis - May 1st, 2014 [May 1st, 2014]
- NATO triples fighter jets in Baltic countries - Video - May 1st, 2014 [May 1st, 2014]
- Lithuania: US hands over NATO air patrol to UK - Video - May 1st, 2014 [May 1st, 2014]
- Ukraine: Kerry announces more support from NATO towards coup - Video - May 1st, 2014 [May 1st, 2014]
- Scoring Political Points? NATO bolsters forces in Eastern Europe - Video - May 1st, 2014 [May 1st, 2014]
- Putin: NATO Chief Rasmussen secretly taped, leaked meeting when he was Danish PM - Video - May 1st, 2014 [May 1st, 2014]
- Russia Accuses NATO of 'Provocative' Actions - Video - May 1st, 2014 [May 1st, 2014]
- NATO & its future NAZI headquarters - Video - May 1st, 2014 [May 1st, 2014]
- NATO Fest 2014 - Video - May 1st, 2014 [May 1st, 2014]
- RAF Jets Respond To Ukraine Crisis 28.04.14 - Video - May 1st, 2014 [May 1st, 2014]
- OSCE team in Ukraine NATO spies: Analyst - Video - May 1st, 2014 [May 1st, 2014]
- NATO commander: Europe concept on international borders changed after Crimea annexation - May 1st, 2014 [May 1st, 2014]
- NATO allies take over Baltic mission from Air Force - May 1st, 2014 [May 1st, 2014]
- NATO official says Russia must now be viewed as more of an enemy than a partner - May 1st, 2014 [May 1st, 2014]
- NATO official says Russia now an adversary - May 1st, 2014 [May 1st, 2014]
- North Atlantic Treaty Organization - The New York Times - May 1st, 2014 [May 1st, 2014]
- Estonian Air Base Turns Into Second NATO Baltic States Hub - Video - May 1st, 2014 [May 1st, 2014]
- Finale Ligure Freeride H e Base nato con Patrik - Video - May 1st, 2014 [May 1st, 2014]
- Ellodesse Mv.1, 2, 3 - nato in Synthesia - Video - May 1st, 2014 [May 1st, 2014]
- NATO Boosts Presence in Eastern Europe Amid Continued Turmoil in Ukraine - Video - May 1st, 2014 [May 1st, 2014]
- NATO's efforts to attain advancement in ariel warfare and defense HD Stock Footage - Video - May 1st, 2014 [May 1st, 2014]
- Me Gusta By Nato 2014 - Video - May 1st, 2014 [May 1st, 2014]
- Toward a Europe Whole and Free: Secretary of State John Kerry - Video - May 1st, 2014 [May 1st, 2014]
- NATO official: Russian moves in Ukraine pose 'grave challenge' to global security system - May 2nd, 2014 [May 2nd, 2014]
- As NATO Builds It's Forces The Economy Is On The Brink Of Collapse -- Episode 355 - Video - May 2nd, 2014 [May 2nd, 2014]
- 15 years on: NATO's Murino Massacre of innocent children remembered In the NOW. - Video - May 2nd, 2014 [May 2nd, 2014]
- Nato -- finally finding its feet? - Video - May 2nd, 2014 [May 2nd, 2014]
- Europe Responds to Russian Aggression: NATO opens second Baltic hub at Estonia's Amari air base - Video - May 2nd, 2014 [May 2nd, 2014]
- NATO air strength triples in Baltic states - Video - May 2nd, 2014 [May 2nd, 2014]
- Russia now an adversary, NATO official says - May 3rd, 2014 [May 3rd, 2014]
- NATO Movie - Video - May 3rd, 2014 [May 3rd, 2014]
- The Expandables: NATO talking heads, war tech on 'crusade control' - Video - May 3rd, 2014 [May 3rd, 2014]
- Friend to Foe? NATO's Deputy Head classifies Russia as enemy over Ukrainian crisis - Video - May 3rd, 2014 [May 3rd, 2014]
- Tiger's Eye Dance by Oasis Dancers at 2014 NATO - JVC Version - Video - May 3rd, 2014 [May 3rd, 2014]
- Cleopatra's Dance by Oasis Dancers at 2014 NATO - JVC Version - Video - May 3rd, 2014 [May 3rd, 2014]
- Slave To The Rhythm Dance by Oasis Dancer at 2014 NATO - JVC Version - Video - May 3rd, 2014 [May 3rd, 2014]