Canada to spend $150 billion a year on defence in historic NATO deal backed by Trump

Canada has pledged to nearly quadruple its military spending over the next decade, committing to spend 5 per cent of its annual GDP on defence by 2035, the most significant investment in Canadian military capability since the Second World War.

The announcement came Wednesday(June 26) at a NATO summit in The Hague, where Prime Minister Mark Carney joined leaders from across the alliance in endorsing a new defence benchmark aimed at bolstering Western deterrence amid rising global instability.

“This is about protecting Canadian sovereignty and ensuring our Armed Forces have the tools they need,” Carney said. “With our allies, we must ensure that Canada remains strong, unified and ready to confront the threats not just of today, but of tomorrow.”

A costly commitment

The commitment, if fully implemented, would increase Canada’s defence budget to an estimated $150 billion annually, including $107 billion in direct military spending and an additional $43 billion for critical infrastructure such as airfields, bases, ports and cyber capabilities.

“This is a generational investment,” Carney told reporters, adding that the plan includes a review in 2029 to ensure it still aligns with emerging threats.

Canada currently spends about 1.4 per cent of its GDP on defence, well below NATO’s long-standing 2 per cent target. The new benchmark significantly raises the bar for all alliance members and represents a political victory for US President Donald Trump, who has long pushed NATO allies to share more of the defence burden.

NATO Secretary General Mark Rutte praised Trump’s influence, noting, “Your leadership on this has already produced $1 trillion in extra spending since 2016. Today’s decisions will produce trillions more.”

In exchange, NATO leaders privately sought assurances from Trump that the United States remains committed to the alliance’s foundational Article 5 clause, which treats an attack on one as an attack on all.

“I stand with it, that’s why I’m here,” Trump said when asked if he still backed Article 5. “If I didn’t stand with it, I wouldn’t be here.”

Still, questions remain about Trump’s consistency. Earlier this week, he said Article 5 “has many definitions,” drawing concern from diplomats.

What it means for Canadians

Carney acknowledged that reaching the 5 per cent target will require trade-offs. “The people making sacrifices so far have been the men and women of the Canadian Armed Forces,” he said, citing outdated equipment and undercompensation.

He warned that future sacrifices could include cuts to other federal programs or increased taxes.

“If we’re moving to higher levels of defence spending because it’s necessary, then we’ll have to make considerations about what less the federal government can do.”

However, Carney insisted the spending will be phased in “at a measured pace” to avoid cost overruns and economic disruption.

Carney also used the summit to advance talks with European allies on diversifying Canada’s military supply chain, including a potential shift away from American-made F-35 fighter jets. A final decision on that review is expected by the end of summer. He also signalled a longer-term interest in acquiring European-built submarines, with decisions likely after 2027.

“This is a big procurement process,” he said. “But there’s lots of interest in helping us with that.”