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Actually he is doing a:
"Give money, or I let the guy with the gun shoot you"
It's the same scheme he uses to pressure Zelensky/Ukraine.
(The NATO agreement was "attempt for 2%" and no way to enforce it if it didn't work out, so Trump's whole "or else" point is a form of blackmail outside of the written agreements)
Doesn't detract from your other point, the European armies do need a boost, have needed one for a while now. And as a combined bloc the EU should muster up a permanent standing (modern) army.
They should also buy/manufacture their own equipment to be less dependable on the whims of the US and keep their defense funds within the EU. But I'll bet this is something Trump does not want to happen, perhaps he'll start shouting the EU should pay HIM 5% and not NATO....
Ad a sidenote, the EU should now be seen as one financial entity and count the % to that, not individual countries.