What to know
- PM Mark Carney announced from a naval base in Halifax that Canada reached NATO’s spending target of 2 per cent of GDP.
- The milestone comes four years ahead of the goal Carney had set during his election campaign.
- One expert says the billions in defence spending are likely the result of “creative accounting.”
Canada has reached North Atlantic Treaty Organization’s (NATO) target of spending two per cent of its Gross Domestic Product (GDP) on national defence, four years ahead of schedule, the federal government announced Thursday.
During his election campaign, Prime Minister Mark Carney had pledged to reach the commitment by 2030 – two years sooner than what the former Prime Minister Justin Trudeau had said.
“Over the past 11 months, our government’s key priority has been to invest, rebuild and rearm the Canadian Armed Forces. … We’re just getting started,” Carney said during his visit to a naval base in Halifax.
LIVE: Canada meets 2% NATO target • EN DIRECT : Le Canada atteint l'objectif de 2 % de l'OTAN https://t.co/4vL6UjOIkA
— Mark Carney (@MarkJCarney) March 26, 2026
Since taking office, Carney had been working hard to minimize the fallouts of a soured Canada-U.S. relationship, which also consists of strengthening relationships with non-American allies.
“We just can’t afford not to spend more on defence because we can no longer rely on our main partner the way we used to,” David Welch, political science professor at the University of Waterloo, tells Now Toronto.
Canada is also the only non-European nation to join Security Action for Europe (SAFE), which provides up to $244 billion in loans to member states for large-scale defence projects. With the country’s history of participating in European security (not to mention the land border it shares with Denmark), Welch says the cooperation between Canada and Europe is “not all that much of a stretch.”
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Canada is not the only NATO ally to increase its defence spendings. In fact, NATO Secretary says all associated nations reached the two per cent target for the first time since it was agreed to over a decade ago.
“And many went much further,” Rutte told reporters. “In fact, we saw a 20 per cent increase in what Europe and Canada spent on defence in 2025 as compared with 2024.”
However, Rutte says there is more to be done in terms of defence industrial bases across ally nations, which he says is “simply not producing enough” and “not fast enough in implementing innovation.”
Canada now eyeing 5 per cent NATO spending target
At last year’s NATO Summit in The Hague, world leaders made a commitment to reaching a five per cent spending target by 2035.
According to Canada’s Parliamentary Budget Officer, that’s an estimated $159 billion in core defence spending in the 2035-36 fiscal year, and an approximately $33.5 billion additional cash expenditure annually over the next decade.
Carney says the government is investing even more than the projection.
“Over the next decade, Canada will unleash a half a trillion dollars, I repeat, half a trillion dollars in defence and defence-related investment,” he said confidently.
When asked by a reporter how he plans to achieve that, Carney said, “Our economy is obviously going to be bigger at that point.”
Whether Carney was ballparking the total investment or not, Welch says numbers like that are usually “moving targets” that could also be a result of what he calls “creative accounting.”
“We could very likely have been spending quite a lot of money on the same things anyway, and just not have counted them as defence spending,” he says.
“We’re in a position to do that now because there’s so much crossover.”
One such “creative accounting” investment is the government’s $40 billion investment into the country’s northern and arctic military infrastructure, which Carney says would support “local activities” including education, healthcare, wastewater management, and other infrastructure needed to support military operations.
“Don’t be alarmed. It’s all part of the plan,” the prime minister reassured reporters.
The $200 million investment in a sovereign spaceport and the establishment of the Bureau of Research, Engineering and Advanced Leadership in Innovation and Science (BOREALIS) are also some others.
Also among Carney’s priorities is space and artificial intelligence (AI)
“Sovereignty requires much more than just conventional defence. It requires reliable access to critical strategic capabilities such as space-based communications and unhindered access to artificial intelligence,” Carney said.
An ambitious plan Canada is equipped to execute, according to Welch.
“Some of the leading-edge researchers in artificial intelligence are Canadians,” he says.
Though the federal government’s cap on international students might hinder the acquisition of talent ever so slightly, Welch says the country’s AI ecosystem is “in pretty good shape for a country our size.”
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The prime minister says investing in cyber, AI and quantum will have direct impacts on national security but also on the domestic economy.
“If we do this right, we protect Canadians, we meet our responsibilities for allies, but we do it in a way that has huge extra benefits for [the] Canadian economy,” Carney said confidently.
However, Welch remains more cautious.
“I don’t even know if we know what ‘doing it right’ means yet because it’s such a rapidly evolving area,” he says.
In the realm of AI and machine learning, Welch says all that can be done is to come up with some form of “guiding principles” and “institutional guardrails against some of the obvious evils.”
Canada furthering defence strategy through Defence, Security and Resilience Bank
As Canada continues to invest more of its GDP on national defence, it’s also continuing its push for allies to join the Defence, Security and Resilience Bank (DSRB) – a pool it spearheaded that would assist defence-oriented firms in participating nations.
“Why? Because what we have seen is that there’s greater demand for military supplies and that small- to medium-sized enterprises in particular require additional capital,” Canadian Foreign Minister Anita Anand said to reporters ahead of the G7 foreign ministers’ meeting in France on Thursday.
Private firms with stakes in defence like PwC Canada and Bank of Montreal have offered support for DSRB, saying the funds would “help enable Canadian companies to invest, scale and innovate in response to evolving security requirements and the Government’s plans for increased defence spending.”
Earlier this week, Canada hosted partners in Montreal for the first in-person round of negotiations to lobby for more nations to join the initiative. Anand says such talks will continue through the spring.
Welch says it all comes back to growing less dependent on our southern neighbour, although creating that separation in defence would be challenging.
“The problem is, North America is an integrated economy, and our defence industries are pretty well-integrated with the American defence industry. So it’s hard to disentangle entirely,” he says.
If the U.S. and Canada’s role in defence were split down the middle, Welch thinks that would be a huge success.
“These [defence] industries require a lot of asset-specific investment, so investors have to be sure that the investments they make are going to be paying off over the long run,” he says.
Welch says there’s bound to be modifications to the Carney government’s commitments as the years progress “just because the world is so fluid.” But as policies twist and turn with geopolitical tides, Welch believes that fundamentally, a sense of direction is more important.
“Everything has an opportunity cost. … There will be some winners and some losers,” he says.
