Washington spent 3.6 per cent past year.
"He suggested that countries not only meet their commitment of 2% of their GDP on defence spending, but that they increase it to 4%", Sarah Sanders told reporters.
With tensions in the Western alliance running high over Trump's trade tariffs on European steel and his demands for more contributions to ease the burden on US taxpayers, the latest remarks fuelled concerns among allies over the USA role in keeping the peace that has reigned since World War II. Trump tweeted after his meeting with Merkel.
"We have a very, very good relationship with the chancellor". We're stronger together than apart.
U.S. officials have said Washington is planning a strategic review, a year after Mr Trump agreed to remain involved in the 17-year-long conflict.
MARTIN: Meanwhile, President Trump gets ready for his summit with Vladimir Putin on Monday.
The U.S., meanwhile, is "paying a lot of money" to protect France, Germany and the rest of Europe, Trump added.
For decades after the end of the Cold War, he said, North Atlantic Treaty Organisation countries had cut defence budgets as tensions fell - and now needed to increase them at a time when tensions were rising.
"Trump on Wednesday also called out Germany for "paying a little bit over 1 percent" on defense", saying that's "inappropriate also". He said opposing the pipeline is not only in Canada's national security interest but its economic interest as well, because even if it lacks the capacity to ship gas to Europe, it keeps future markets open. Merkel insists the project is a private commercial venture and is not funded by German taxpayers.
His demand that they raise their contributions to 4 percent came as a surprise during the first meeting of this week's Brussels summit.
Trump didn't identify Nord Stream 2 by name.
The feud over defense spending looks set to overshadow other business at the two-day summit.
Although administration officials point to the long-standing alliance between the United States and the United Kingdom, Trump's itinerary will largely keep him out of central London, where significant protests are expected. "And it can't be explained, and you know that".
"Germany is totally controlled by Russia", Trump said at the summit's start on Wednesday.
"And the former Chancellor of Germany is the head of the pipeline company that's supplying the gas".
Credit for those added billions is being claimed fully by the US president.
Trump's laser-focus on Germany has unsettled Berlin, which had grown accustomed to a strong relationship with President Barack Obama. "He generally dislikes the Alliance and Allied solidarity, the very principle of an alliance and mulitlareral frameworks", she said.
Journalists were allowed briefly into the room at the end of their meeting, but both leaders avoided publicly blasting each other face-to-face.
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