Mr Trump accused numerous members of the alliance of not paying their dues, including Germany, during Wednesday’s NATO summit in Brussels.
The current spending target for the 29 countries which are members of NATO is two percent of a nation’s GDP – with Mr Trump incensed that Germany’s contribution amounts to just 1.24 percent.
Pressed by reporters after the meeting, Mrs Merkel acknowledged that leaders had a “very serious discussion” on the subject of NATO contributions.
She added: “All I can do is summarise what the result is: a clear commitment by all to NATO and a clear readiness to contribute in the face of changing security situations.”
Mrs Merkel added Germany was ready to “do even more”, suggesting an increase in the amount it pays in.
Mr Trump had threatened behind closed doors that unless the two percent target for 2019 was achieved by all member states, he would “do his own thing” .
His statement was received with widespread uncertainty by fellow leaders concerned that this could mean troop reductions or even the complete collapse of the post-World War 2 alliance.
German-based news site SHZ reported that a crisis meeting was then held at which Mr Trump said: “The commitment of the United States to NATO is very strong, remains very strong.”
He also apparently told them he would be unhappy if they did not increase their contribution, claiming: “They have increased it substantially.”
Tellingly, he also said Germany had “very substantially” improved the timetable for the increase in military spending
However, NATO Secretary General Jens Stoltenberg did not confirm what was promised on Thursday.
Mr Trump’s stance appears to have triggered a debate within Germany, with Volker Kauder, general secretary of Mrs Merkel’s Christian Democratic Union (CDU), telling the Frankfurter Allgemeine Zeitung newspaper: “We have to reach the 1.5 percent target in this parliamentary term.”
If the increase was met, this would be significantly earlier than originally envisaged, given that the life of the term is due to run until 2021, and that Germany had previously targeted 2024.
However, it would still leave Germany lagging behind the two percent target which Mr Trump is calling for.
During the course of the summit, Mr Trump also singled out Germany for criticism over a gas deal with Russia which he claimed made it a “captive” of Vladimir Putin’s regime.
Mr Trump, who is currently on a visit to the UK, is due to meet Mr Putin in Helsinki for wide-ranging talks which will cover the situation in the Middle East, and nuclear proliferation.
(Additional reporting by Monika Pallenberg)