Prime Minister Mark Carney is committing that Canada — along with other NATO allies — will invest five per cent of GDP on defence by 2035, a pledge that will mean billions more in spending per year and the biggest increase since the Second World War.
All NATO members – except for Spain, which secured an exemption – made the new commitment at the alliance’s annual leaders’ meeting in The Hague on Wednesday, with an agreement to review the target in 2029.
The five per cent will be broken down into two parts, with the first 3.5 per cent aimed at core defence needs including jets and weapons, and the remaining 1.5 per cent on defence-related investments including infrastructure.
“Throughout Canada’s history, there have been turning points when the world’s fortunes have been in the balance, and each time Canada has chosen to step up to lead on the path of democracy and freedom,” Carney said to reporters at the summit following the announcement. “We’re once again at one of those moments. If we want the world of tomorrow to be shaped by our values, Canada must be ready.”
Earlier this month, Carney announced Canada would spend an additional $9.3 billion on defence spending and meet NATO’s previous two per cent of GDP target this fiscal year, after years of pressure to do so from allies. Up until then, Canada had never hit that mark despite its 2014 pledge to do so. The federal government is expected to spend about $62 billion on defence this year.
In an interview with CNN International on Tuesday, Carney said reaching five per cent of GDP would amount to $150 billion per year.
“It is a lot of money,” Carney told CNN host Christiane Amanpour.
But Carney also told CNN that Canada will reach the five per cent target through measures the federal government is already doing or about to do – like the development of critical minerals.
“A little less than a third of that overall number is spending on things that quite frankly we’re already doing to build the resilience of our economy,” the prime minister said. “So, it would be domestic resilience, it would be defending the areas that are important to defend, but also supporting critical minerals development.”
When asked on Wednesday about whether Canada’s new defence spending commitments will mean Canadians will need to make sacrifices in other places, Carney said “we’re not at a trade-off” and the investments will “help build our economy as it improves our defence.”
But Carney did concede that the federal government may need to make concessions later this decade or into the next one to afford spending more on defence.
“Depending on how the threat environment evolves globally, if we are moving to the higher and higher levels of defence spending because that’s necessary, then we will have to make considerations about what less the federal government can do in certain cases and how we’re going to pay for it,” he added.
Asked directly if he has an estimation on what 3.5 per cent of GDP on core defence spending will look like in 2035, Carney said “no” in part due to the changing threat environment.
“We should spend for the environment, not for what could be an arbitrary number,” Carney said.
‘We don’t need to waste money’
In an interview with CTV’s Power Play with Vassy Kapelos last week, Parliamentary Budget Officer (PBO) Yves Giroux said the federal government’s latest move to add more than $9 billion towards defence to hit two per cent of GDP this year does track from a fiscal perspective, adding that the dollar amount will “be increased year after year” as GDP changes, amid inflation and economic growth.
“Eventually the number might have to be much bigger,” Giroux said. “And the important point to keep in mind is it’s not the amounts allocated to defence, it’s the amounts that actually get spent on defence that matters for NATO.”
When pressed if Canada’s new commitment implies high deficits unless there are tax increases or program cuts, Carney reaffirmed his election promise to balance the operational budget in three years.
“We’ll grow this economy. We’ll balance our operational budget in three years. That’s our commitment,” Carney said. “But we will also invest in this country including in our defence industry.”
Conservative defence critic James Bezan says he is looking for details to ensure Carney and the Liberal government “aren’t using creative accounting” to hit the new spending targets.
“We just don’t need to waste money. We actually want to see this invested in capabilities,” Bezan said in an interview with CTV News Channel on Wednesday. “We want to make sure that those members that serve in the Canadian Armed Forces are well taken care of.”
Bezan also affirmed his party’s call for a federal budget, saying “we need to know where this money is coming from.”
Following the election this spring, the federal government did not present a budget before the House of Commons rose for the summer, but Carney has said his government will table a budget this fall.
Former prime minister Justin Trudeau’s government did present a fiscal update in late December — which showed the finances were much worse than expected — but it was overshadowed by the sudden resignation of then-finance minister Chrystia Freeland.
Trump calls new commitment ‘big win’
Speaking to reporters at the Hague, NATO Secretary General Mark Rutte said the new pledge will shift the burden on the alliance away from the United States.
“The decisions made today will make NATO much stronger. They also make NATO a fairer alliance with Europe and Canada stepping up and carrying their fair share of the responsibility for our shared security,” Rutte said.
U.S. President Donald Trump has long pushed for NATO allies to increase defence spending and publicly voiced discontent over allies like Canada for taking advantage of U.S. security.
On Wednesday, Trump touted the new pledge as a “big win” for the U.S. and the West.
“I’ve been asking to go up to five per cent for a number of years and they’re going up to five per cent, from two per cent and a lot of people didn’t even pay the two per cent. I think that’s going to be very big news. NATO’s going to become very strong with us,” Trump said at the summit.
Following the announcement, Rutte praised Trump for pushing allies to boost defence spending and said Trump has reaffirmed his commitment to NATO despite his past criticisms of the alliance.
“President Trump has been clear. America is committed to NATO. He affirmed it again today in no uncertain terms,” Rutte said. “At the same time, he made clear that America expects European allies and Canada to contribute more, and that is exactly what we see them doing.”
According to NATO estimates in 2024, the U.S. spent 3.38 per cent of its GDP on defence last year, accounting for two-thirds of NATO spending.
