It's tolerated because the harm is small and the cost of retaliation is high enough that the target countries aren't willing to go very far to punish it. The sp

It's tolerated because the harm is small and the cost of retaliation is high enough that the target countries aren't willing to go very far to punish it. The spying carried out between allies is often about military information that the target country already has. See, for example, the Jonathan Pollard case, where Israel stole US intelligence on Iran. The spy was imprisoned for almost 30 years (considered a bit extreme by the Israeli system, though that may reflect different norms about incarceration in general). Similarly, an American spy (Yosef Amit) sent information about Israeli troop deployments to the US, and was in prison for 7 years. Both sides worked hard to get their respective spies released, and were stubborn about not releasing the ones they had in custody, but because the countries were allied no one was willing to go to the mat over the issue.