While U.S. defense spending makes up 70 percent of combined allied governments' military budgets, just 15 percent of U.S. expenditure is spent in Europe on NATO-related defense.
White House officials confirmed he made the remarks during the summit of North Atlantic Treaty Organisation leaders in Brussels.
Trump and Merkel later held businesslike talks on the sidelines.
While NATO members increased overall defense spending in 2017, for a second consecutive year, the United States was still largely outspending all other members.
German Defense Minister Ursula von der Leyen told NPR on Wednesday that Trump makes a fair point that Germany should spend more but is not the first US president to urge that.
The EU president then directly addressed Trump, "who for a long time now has been criticizing Europe nearly daily for, in his view, insufficient contributions to the common defense capabilities, and for living off the United States".
Speaking at a press conference in Brussels ahead of the two-day summit, Trump complained that Russian Federation enjoyed undue influence over Germany thanks to "inappropriate" oil and gas deals.
The NATO chief was also frank about the impact of Trump's stance at a broader level.
Trump's surprise demand came after he clashed with Chancellor Angela Merkel, calling Germany a "captive" of Russian Federation because of its gas links and singling out Berlin for failing to pay its way.
This is not the first time Trump has taken aim at Nord Stream 2.
The defense minister agreed with Trump about defense spending.
Trump has not responded to Kerry. Budget increases started after Russia's 2014 annexation of Ukraine's Crimean Peninsula, and they have accelerated in the Trump era in response to the US President's criticism.
"Germany is a captive of Russia", Trump said at a meeting with NATO Secretary General Jens Stoltenberg, his first since arriving in the Belgian capital. "Explain that. And it can't be explained", Trump said. "And it can't be explained, and you know that".
Trump used Germany as an example. Munich's Süddeutsche Zeitung headlined its story: "It is not only bad, it is catastrophic".
The exchange was part of an uncomfortable day as anxious Western allies were subjected to the USA president's "America first" approach.
Asked about Trump calling Germany Russia's "captive", Cornyn said: "I would not choose that word but I understand what he's getting at".
But in Russian Federation, where the political system is obsessed with hierarchy, status and displays of raw power, Putin has "already got his victory", said Andrey Kortunov, head of RIAC, a foreign policy think-tank close to the Foreign Ministry.
Journalists were allowed briefly into the room at the end of their meeting, but both leaders avoided publicly blasting each other face-to-face.