Canada’s Defense Budget in the Spotlight: Big Changes Ahead

💰Canada’s Defense Spending

Canada is taking a hard look at its military budget, launching a comprehensive review to determine how much more it can commit to NATO as the alliance looks to ramp up defense spending to levels not seen since the Cold War. 🪖

Defense Minister David McGuinty, speaking from NATO headquarters in Brussels on Thursday, said the federal government is conducting a “top-to-bottom” review of all its defense expenditures. McGuinty signaled that Canadians can expect “much more to say about that financially in very short order.”

🌍 The NATO Push: 5% of GDP on Defense?

McGuinty is attending the final meeting of NATO defense ministers ahead of the leaders’ summit later this month in the Netherlands. The alliance is expected to formally adopt new spending targets, with a bold — and unprecedented — 5% of GDP figure on the table.

👉 Currently, Canada spends just 1.33% of GDP on defence (1.45% expected this year), well below NATO’s long-standing 2% benchmark. Despite repeated pledges to increase spending, Ottawa has never reached that target in modern times. The last time Canada hit 2% was back in 1990, and 5% has not been seen since 1957.

NATO Secretary-General Mark Rutte said on Thursday that the defense ministers were finalizing “capability targets” — essentially shopping lists of critical military gear needed across the alliance. These priorities include air and missile defense systems, artillery, ammunition, and drones.

The 5% target — if agreed upon — would be split into 3.5% for core defense needs like fighter jets and ships, and 1.5% for “defense-adjacent” areas such as cybersecurity, infrastructure, and industrial capacity.

📈 Trump’s Influence and the Pressure on Canada

Pushing this ambitious 5% spending target is none other than U.S. President Donald Trump. His administration has been vocal in demanding that allies step up. Speaking outside NATO headquarters, U.S. Secretary of Defense Pete Hegseth said he expects the 5% goal to become official policy at the upcoming NATO summit.

Notably, no NATO member currently meets this ambitious 5% threshold — not even the U.S. itself. Hegseth did not take questions from reporters, but his message was crystal clear: Allies must pay up.

🛫 Canada’s Arctic Defense Efforts and Submarine Plans

Canada has already announced a $6 billion investment to bolster Arctic security — a region seen as increasingly critical due to climate change and global competition. However, Ottawa’s overall military budget remains below even the longstanding 2% NATO target.

One potential game-changer: the planned purchase of up to 12 new submarines to replace the aging Victoria-class fleet. Ottawa expects to award the submarine contract by 2028, and the Trudeau-era government argued that this alone could push Canada to the 2% mark.

Prime Minister Mark Carney has pledged to accelerate Canada’s progress on the 2% target, promising to meet it by 2030 — two years earlier than the previous 2032 goal.

🎯 The Stakes: Russia, China, and Global Security

Minister McGuinty acknowledged the immense challenges ahead. Speaking with a sense of urgency, he noted that Russia’s invasion of Ukraine has destabilized global security, while China’s ambitions in the Indo-Pacific are adding to the strain.

He concluded with a stark reminder of what’s at stake:

📅 What’s Next?

All eyes now turn to the NATO leaders’ summit on June 24 and 25 in the Netherlands. Will Canada commit to this new 5% target? Can it meet even the 2% threshold in the near term? And how will this new wave of military investment shape Canada’s role in global security?