Speaking at the US embassy in London, Woody Johnson said Theresa May needed to balance public spending on health, transport and education, with expenditure on defence and security.
Mr Johnson said: “Healthcare is always going to be an issue, education is always going to be an issue, transportation and infrastructure are always going to be issues, etc.
“But how important is it to defend yourself?
“I came over here and my mission is security and prosperity, and you really can’t have prosperity unless you have security.”
He added: “You’re going to have to make trade-offs and go through the emotional and practical and philosophical arguments in terms of what you want to do, what you want to be, how important is defence?
“How you want to be perceived, by the US, but also by Russia and others?”
The US official’s comments come amid growing tensions over NATO defence spending, after Donald Trump criticised EU nations for failing to meet key NATO commitments and saying he no longer wanted the US to bankroll Europe’s security.
Speaking following his meeting with German Chancellor Angela Merkel in April, President Trump said: “We talked about the security of Europe and the responsibility of European nations to properly contribute to their own defence.
“All member states must honour their commitment to two per cent, and hopefully much more, of GDP, on defence.
“It is essential our allies increase so everyone is paying their fair share.
“A lot of countries have stepped up. They have to keep going.”
Mr Johnson also commented on the UK’s ability to fulfil its commitment to purchase 138 new F-25 Lightning II fighter jets.
The British army has already purchased 15 of the fighter jets, and has committed to purchase another 33 by 2025, but has failed to provide a precise timeline.
The cost of the jets, estimated to be around £150million per aircraft, has raised growing concerns about the viability of the programme among military chiefs.
The Public Accounts Committee which scrutinises the Ministry of Defence’s spending stated just last week that the MoD could face a whopping £21billion funding shortfall over the next decade, placing the purchase of vital new equipment including fighter jets, submarines and armoured vehicles in jeopardy.
The PAC’s report into the MoD’s ten-year equipment plan for 2017-27 stated: “The ministry simply does not have enough to buy all the equipment it says it needs.”
Committee Chair Meg Hillier commented on the worrying report, stating: “The MoD’s national security responsibilities give it a unique and critical place in the public sector but that is no excuse for a lack of rigour in its financial affairs.
“It is concerning that the Department could find itself more than £20billion short of the funding required to buy the equipment it says it needs.”
Shadow Defence Secretary Nia Griffith also commented on the situation, stating: “Our defences require proper investment, not more excuses and denial.”