Canada and NATO’s Defence Spending Challenge

Why NATO’s 5% Target Isn’t What It Seems—and What It Means for Canada

Canada Is Finally Taking Defence Seriously

For the first time in my memory, Canada is paying attention to defence. Sure, most people have a vague idea that we don’t spend very much on the military, but many conflate the Canadian Armed Forces with those of the United States—if they think of military capabilities at all. This seems to have changed, and as I’ve discussed repeatedly in previous articles, we generally have Donald Trump to thank (or blame).

I’m not going to delve too deeply into the background of what’s currently happening; I’ve written extensively on this subject, and those articles are available if you want to know what my thinking has been. Instead, I’m going to focus on one thing: the results of the ongoing NATO summit in The Hague.

Trump 1.0 caused immense consternation within NATO. During his first term, Donald Trump threatened to walk away from the Alliance, claiming it wasn’t “paying” its share. That Trump fundamentally misunderstood how NATO funding works didn’t really matter. What mattered was that there was some truth to the accusation, no matter how it was phrased. European members of NATO (and I include Canada in this regard) cashed the so-called “peace dividend” in a big way. Europe’s entire defence establishment and infrastructure was dismantled in immense relief following the fall of the Soviet Union. And lest we forget, the United States made massive cuts too—the current U.S. presence in Europe is a shadow of its former self.

So, while Trump’s belligerence was incredibly off-putting, there was a nagging realisation that he was right and that the rest of NATO had lulled itself into dependency on the U.S. Unfortunately, this attitude didn’t shift significantly, even after Putin’s invasion of Crimea in 2014. The complacency was very real. It took the much larger-scale Russian invasion of Ukraine to begin to shake this mindset—but even then, there was a great deal of denial and attempts to conduct business as usual. I would certainly put Canada under Justin Trudeau into this category.

Enter Trump 2.0. Trump’s second term has been characterised by irrational bluster and threats, by a rapid drift toward authoritarianism at home, and by an approach to international relations that includes rabid American exceptionalism and transactional treatment of virtually every issue. Worse, Trump’s ego is unrestrained and is now equated with the United States itself; criticism of Trump is criticism of America—and vice versa.

In this environment, Trump has demanded that NATO allies commit 5% of their GDP to defence spending. It’s likely a number he has completely made up. It is certainly not based on any serious strategic analysis. NATO itself is afraid that if the figure is not met, the U.S. will withdraw from the Alliance entirely. Until today (25 June 2025), the response—at least from some NATO leaders—has been almost fawning obsequiousness, with attempts to flatter Trump into staying. Never mind that Trump has threatened two founding members, Canada and Denmark, with annexation and military action. After all, that was four months ago. Today, the effort seems to be to keep Trump engaged.

For Canada, the situation is more complex. Canadians are demanding a reset in relations with the United States, and the current government was elected largely on promises to address Trump head-on. However, the decades-long criticisms of our defence posture—of our lacklustre spending and reliance on the U.S. for security—are now being viewed through a new lens, one where the United States is unreliable and, indeed, a potential threat.

So, largely in an effort to placate Trump (and to boost his massive ego even further), NATO has agreed to increase defence spending to 5% of GDP over the next ten years. This is a massive increase—one only seen during wartime—and is unsettling even to defence hawks like myself. It is a level that even the United States is nowhere near meeting (why the media isn’t addressing this is beyond me). But, like many things, the devil is in the details—and 5% really isn’t 5%.

NATO nations committed to an actual defence spending increase to 3.5% of GDP, to be achieved in the next decade. The remaining 1.5% is to be directed toward “defence-related” infrastructure, industry, and enabling capabilities—the nature of which is conveniently undefined. Spain sought an exception to this target, but the remaining members signed on—likely because 3.5% is much more achievable than 5%.

What does this mean for Canada? The press is already hyperventilating about an increase that would result in a defence budget of some $150 billion. This is certainly not the case. Instead, we’re looking at an increase from our current 2% to 3.5% by 2035, with a re-evaluation in 2029. This could be achieved by accelerating projects currently on the books—but with extremely long timelines. Indeed, I have previously argued that the timelines are far too long. Moreover, I strongly suspect that Ottawa will engage in some smoke and mirrors to reach the target; we’re already “re-orienting” the Canadian Coast Guard to include it in our overall defence spending. We can expect much more of this sort of thing.

For the rest? Prime Minister Carney addressed this yesterday (24 June) in an interview with CNN. “Defence infrastructure” can mean many things, including the development of critical mineral sources, improvements to ports, increased border security, dual-purpose industries, and many other things. We will also improve our cyber and information systems defences. It all counts toward the additional 1.5%. In my opinion, these are all things that should be done anyway—especially as they serve to further decrease our reliance on the United States.

The latter seems to be the government’s overall objective. Canada has signed an extremely comprehensive defence and security partnership with the European Union—one that will likely give us access to the EU’s SAFE programme of defence loans, funding, and industrial development initiatives. This is a critical shift, one that will essentially see Canada treated as a member of the EU for defence purposes. All of this funding and development will count toward NATO’s target.

Things are also moving to draw us even closer to the United Kingdom, with announcements made before the recent G7 summit about the reopening of the British base at Suffield, Alberta, increased bilateral intelligence sharing, deeper defence co-operation, and a focus on cyber and information systems. I strongly suspect that there is more that has not been mentioned in public. Indeed, there may be things happening with France that have not yet been announced as well.

I’ll freely admit that I am greatly relieved at the Government’s approach to strategic issues and international affairs. Ottawa does indeed go out of its way to avoid directly criticising Trump, fully realising that a wrong word could result in new tariffs, a change in security relations, or new talk of annexation. After all, like most authoritarians, Trump equates himself with the United States itself. But under the radar, things seem to be changing extremely rapidly and with the urgency that these articles have begged for—for months.

Canada will not be increasing defence spending to 5% of GDP to placate Donald Trump. Instead, we will continue to leverage such demands to disentangle ourselves from the American security regime by diversifying our defence partnerships and by improving our strategic posture through enhancements to areas that increase our security independence.

Could Canada spend 5% of GDP on defence? Probably not. It is far too much, and our small Armed Forces couldn’t absorb it. But we can spend 3.5%—and leverage the remaining 1.5% to improve those things that matter to Canada’s overall security and independence.