It may be a little late, but Canada has finally followed through on a promise it made to its allies 20 years ago.
What happened: NATO announced that for the first time, Canada’s defence spending has hit the alliance’s target of 2% of GDP. Ottawa has allocated $84 billion over the next five years to defence, the largest investment that the Canadian military has seen since the Korean War.
The 2% target was set by NATO in 2006, but Canada never came particularly close to hitting it. Former Prime Minister Justin Trudeau said the earliest they could reach the mark would be 2032.
Why it matters: For two decades, Ottawa took heat from the Americans for not hitting the NATO target and piggybacking off of their military. Now, it’s largely the ruptured relationship with the Americans (and far too many 51st state ‘jokes’) that has sparked this wartime defence spending spree.
In a watershed moment, Prime Minister Carney said last year that Canada can no longer rely on the U.S. for protection. President Trump has previously said the U.S. won’t protect countries that underspend on defence.
Historically, around three-quarters of Canada’s defence spending has gone to the U.S., but over the last year, Ottawa has prioritized upgrading its aging military equipment, investing more in the domestic defence industry, and leaning more on European allies.
Bottom line: The billions in extra defence spending will inevitably crowd out other budget priorities like housing and healthcare. That said, continuing to miss the NATO defence targets also risks hurting Canada’s standing with its allies and would likely reduce Ottawa’s leverage in trade negotiations with the U.S.—LA
