"We celebrate our history, our people, and the heroes who proudly defend our flag," he told a crowd on Thursday at the Lincoln Memorial, the BBC reported.
Armoured carriers and tanks are part of the "Salute to America" backdrop.
Opponents accuse him of politicising the holiday ahead of a re-election campaign and wasting taxpayer's money.
The Pentagon has not revealed the cost of the extravaganza, which many believe was inspired by Trump's visit to the Bastille Day parade hosted by French President Emmanuel Macron.
Some reports say the National Park Service is diverting nearly $2.5 million to cover the cost.
As well as tanks, Trump's July 4 celebration features a military jet flyover and an extended fireworks show.
As the armoured vehicles were transported from a railyard in south-eastern Washington DC on Tuesday evening, military officials advised residents not to be alarmed.
The two 70-tonne Abrams tanks have to stay on a side road as they are too heavy for the memorial's surrounding areas.
In a morning tweet, Trump said the parade was "turning out to be one of the biggest celebrations in the history of our Country".
He will be keeping a keen eye on the turnout, given the arguments over the claimed attendance of his inauguration ceremony back in 2017.
The event is open to the public free of charge, apart from a ticketed area for VIPs in front of the memorial.
Large numbers of Trump supporters wearing Make American Great Again hats - and opponents upset at the cost - have descended on the capital.
Trump supporter Brandon Lawrence told Reuters: "I think what Trump's doing with the tanks, all the flyovers, I think it's great."
Critic Medea Benjamin said: "This is costing us millions and millions of dollars. We the taxpayers are paying for it, for Donald Trump to use our military as a prop."
The musical playlist includes the Star Wars theme and Hail to the Chief.
The event has been largely good-humoured, although there were scuffles outside the White House earlier on Thursday after a flag-burning protest.
( With inputs from IANS )