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Investing.com -- The European Union’s agreement to increase defense spending to 5% of economic output could help resolve trade tensions with the United States, according to a top EU official.
António Costa, head of the European Council, stated that "a large part of this 5% will be spent for sure buying American, and it helps to rebalance the trade relations." He added that the NATO agreement "paved the way to have an agreement as soon as possible on trade."
The deal, reached at a North Atlantic Treaty Organization summit last week, commits Canada and European members to raise defense spending from the previous 2% target to 5% to address Russian aggression threats.
Despite progress on defense cooperation, trade disputes between the U.S. and the EU remain unresolved. The White House has threatened to impose 50% tariffs if no trade deal is reached by July 9.
"On defense, it’s solved," Costa remarked. "On trade, the point is we have a large imbalance in our relations."
According to Commerce Department figures, the U.S. has a $236 billion goods-trade deficit with the EU, though it maintains a surplus in services trade.
Costa, Portugal’s prime minister from 2015 until 2024, emphasized that increased European defense investment and purchases of American goods would have "a positive impact" in reducing the U.S. trade deficit.
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