Canada Accelerates Defence Spending to Meet NATO 2% GDP Target in 2025

Canada's Commitment to Defence Spending Acceleration

On June 9, 2025, Canadian Prime Minister Mark Carney announced a significant acceleration in Canada's defence spending plan, aiming to meet NATO's 2% of GDP military expenditure target this fiscal year, five years earlier than the previous commitment set for 2032. This move responds to growing global security threats and increasing pressure from NATO allies, especially the United States, for Canada to enhance its military capabilities and contributions.

Urgency Behind the Increased Defence Budget

Carney emphasized that the global security environment has become more perilous, with rising threats from state and non-state actors, cyber warfare, and geopolitical tensions, particularly in the Arctic region. He highlighted Canada's overreliance on the United States for security and the need for Canada to independently strengthen its defence posture. The Prime Minister framed this increase as essential for protecting Canadian sovereignty and interests, not merely to satisfy NATO's accounting standards.

Details of the Defence Spending Increase

The government plans a cash increase of approximately CAD 9.3 billion in defence funding for the 2025-26 fiscal year. This investment will cover pay raises for Canadian Armed Forces personnel and procurement of new military equipment, including submarines, aircraft, naval vessels, armored vehicles, artillery, drones, radar systems, and sensors to monitor the ocean floor and Arctic territories. The plan also includes strengthening digital and cyber defence capabilities, reflecting modern warfare demands.

Four Pillars of Canada's Defence Strategy

Carney outlined a comprehensive strategy based on four pillars: investing in personnel and equipment, enhancing military capabilities, strengthening the domestic defence industry, and diversifying defence partnerships beyond the United States, with a notable shift towards closer collaboration with European allies. This diversification aims to reduce dependency on the US and build a more resilient and self-sufficient defence infrastructure.

Political and International Context

The announcement comes amid heightened calls from NATO and US officials, including former President Donald Trump, for member states to increase defence spending. Canada has historically lagged behind many NATO countries, spending about 1.4% of GDP on defence in 2024, ranking near the bottom among alliance members. Carney's accelerated timeline and increased budget aim to restore Canada's standing as a reliable NATO partner and address criticisms of underinvestment.

Economic and Industrial Implications

The government stressed that defence spending will prioritize Canadian-made equipment and supply chains to support domestic industry growth. This approach is expected to stimulate economic activity and innovation within Canada's defence sector. Carney also assured that the increase would not involve raising taxes, instead relying on efficient budget management and reallocation of resources.

Looking Ahead: NATO Summit and Future Commitments

Canada's announcement precedes the NATO summit scheduled for late June 2025, where broader defence spending targets and strategies will be discussed. NATO Secretary-General Mark Rutte has proposed increasing defence investments to 3.5% of GDP, with an additional 1.5% for related security expenditures. Canada’s commitment to meet and eventually exceed the 2% target positions it as a proactive member ready to contribute to collective security in an evolving global landscape.

Summary

In summary, Prime Minister Mark Carney's announcement marks a pivotal shift in Canadian defence policy, accelerating military spending to 2% of GDP in 2025. This strategic move addresses emerging security challenges, reduces reliance on the US, and strengthens Canada's role within NATO through enhanced capabilities, domestic industry support, and diversified alliances.