In a historic shift that could redefine Canada’s global role and military identity, Prime Minister Mark Carney confirmed this week that Canada will commit to NATO’s ambitious new defence spending target—5% of national GDP by 2035. The announcement came during the NATO summit in The Hague, where leaders unanimously adopted the new benchmark, replacing the long-standing 2% goal set in 2014.
It’s a bold leap for a country that has consistently lagged behind its allies when it comes to military funding. As of 2024, Canada was spending just under 1.4% of its GDP on defence—approximately $41 billion. Hitting the 2% target required a significant push this year, with Ottawa injecting an additional $9 billion into the defence budget. But the new commitment—more than doubling that spending over the next decade—marks a profound turning point in the country’s strategic and fiscal priorities.
“This is about Canada stepping up to meet the moment,” Carney said during a press conference at the summit. “We’re living in a time of unprecedented geopolitical instability. We have a responsibility to protect not only our sovereignty, but also to strengthen our alliances and defend the values we share with democratic nations around the world.”
From Cold Feet to Cold War Mentality
The path to this point has been long and, at times, politically fraught. Canada has not spent 5% of its GDP on defence since the 1950s, during the early days of the Cold War. Over the past three decades, successive governments have struggled to meet even the previous NATO benchmark of 2%, often citing domestic priorities like healthcare and education as more pressing fiscal concerns.
But the war in Ukraine—now well into its third year—and a rising tide of authoritarian threats have forced a dramatic reconsideration. NATO officials have framed the new target as not only a military necessity but also a matter of long-term survival for Western democracies.
The revised 5% goal is split into two streams: 3.5% for traditional military spending, and 1.5% for what’s being called “defence-adjacent” needs—such as cybersecurity, critical infrastructure, and the domestic defence industry.
Billions on the Table, and a Decade to Spend It
Canada’s plan to reach the target involves a multi-layered strategy already in motion. The 2025–2026 federal budget included over $2 billion in new defence commitments, including funding for the upkeep of military fleets, new technology acquisition, and cyber-defence upgrades.
Much of the focus will fall on modernizing the Canadian Armed Forces and expanding its capabilities in the Arctic, where sovereignty concerns continue to grow. The government has also earmarked funds for the acquisition of next-generation tactical helicopters, and is reviewing a massive $19 billion contract to purchase F-35 fighter jets, with a final decision expected by the end of this summer.
Beyond military equipment, Canada’s roadmap includes infrastructure investments that will support the broader defence ecosystem. That means upgrading military bases, building Arctic ports, reinforcing transportation networks, and investing in telecommunications. Ottawa is also committing $2.1 billion to bolster the domestic defence manufacturing sector—a move aimed at reducing reliance on foreign suppliers while boosting Canadian innovation and job creation.
Canada’s commitment doesn’t stop at home. Just days before the NATO summit, the federal government signed a new defence cooperation pact with the European Union, designed to facilitate joint arms procurement and streamline coordination on global threats. It’s a sign that Canada is looking to broaden its partnerships, particularly as concerns grow over the potential isolationist stance of the United States if Donald Trump returns to power in November’s election.
Who Pays—and Who Benefits?
The financial implications are staggering. Based on current GDP projections, Canada will need to spend roughly $150 billion per year by 2035 to meet the 5% commitment. That includes about $107 billion in core defence spending and another $43 billion for associated infrastructure, cybersecurity, and industrial growth.
National Bank Financial has warned that the country will likely need to issue tens of billions in new debt to meet its targets. So far, the federal government has insisted that no tax increases or significant spending cuts will be needed in the near term. But as the decade progresses, budget analysts expect tough choices to emerge.
“This is a generational investment,” said former defence official Charles McGregor. “You don’t just build up an entire military-industrial complex overnight. It requires long-term planning, cross-party consensus, and, frankly, public buy-in.”
For members of the Armed Forces, the new funding means long-overdue improvements to pay, housing, equipment, and operational readiness. For Canadian workers and businesses, especially those in aerospace, advanced manufacturing, and cybersecurity, it could represent a new era of opportunity. However, provincial governments are already warning of potential trade-offs in health and education funding if federal transfers begin to tighten under the weight of defence obligations.
Global Stakes, National Identity
The decision to massively increase defence spending is as much about geopolitics as it is about economics. With Russia’s aggression continuing in Eastern Europe, and tensions rising in the Indo-Pacific, NATO’s consensus is clear: the world is entering a new era of strategic competition.
For Canada, the decision signals a reinvention of its global role—from peacekeeper and reluctant ally to assertive defender of the Western alliance. It’s a pivot that has drawn both applause and criticism.
“We are not just doing this because the Americans told us to,” said Carney. “We are doing this because Canada must be ready to defend itself—and help lead in defending the free world.”
The coming months will be critical. By mid-2026, Canada must publish a full national roadmap outlining how it will reach the 5% target. NATO has scheduled a comprehensive review for 2029 to measure progress, with potential consequences for countries that fall behind.
What’s Next?
The next big milestone will be Ottawa’s decision on the F-35 fighter jet order, expected before the end of the summer. That deal could anchor Canada’s air power strategy for the next three decades. Meanwhile, public consultations, industry outreach, and regional infrastructure plans are ramping up as departments race to turn promises into action.
The scale of the challenge cannot be overstated. But the political resolve—at least for now—seems firm. In a world that’s becoming more dangerous, Canada is betting big that strength and preparedness will offer not only protection, but influence.
The gamble will define more than just defence policy. It could shape the country’s economic path, its alliances, and its identity in the world for decades to come.
