Trump says U.S. will ask NATO member countries to boost defence spending to 5 per cent of GDP

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U.S. President Donald Trump announced Thursday that the United States will ask members of the NATO alliance, which includes Canada, to increase military spending to 5 per cent of annual economic output – levels not seen since the Cold War.

He told the World Economic Forum that the United States, which has the world’s largest military, should no longer have to shoulder so much of the responsibility for collective defence under the North Atlantic Treaty Organization, whose membership is almost entirely in Europe.

In a virtual address to global business and political leaders gathered in Davos, Switzerland, Mr. Trump also brought his trade complaints with Canada to an international stage, repeating his threat to impose tariffs on Canadian goods and saying this could all be avoided if his country’s northern neighbour agreed to be annexed as an American state.

And he outlined his broader economic vision of boosting investment and manufacturing in the United States at the expense of trading partners. He said he will lower corporate taxes on U.S.-based production and invited companies from around the world to set up factories in the United States.

“If you don’t make your product in America, which is your prerogative, then very simply, you will have to pay a tariff,” he said.

Canada would be hard-pressed to ramp up defence spending to 5 per cent because of the exorbitant cost. David Perry, president of the Canadian Global Affairs Institute, estimated that Mr. Trump’s proposal would cost Canada $100-billion in additional annual spending. That would amount to more than tripling existing military spending.

No NATO members currently spend an amount equivalent to 5 per cent of GDP on defence.

The U.S. military budget is currently equal to about 3.38 per cent of its GDP, according to NATO estimates released in the summer of 2024. Poland’s budget is about 4.12 per cent of its annual economic output, according to NATO figures.

Canada is already a laggard in meeting NATO’s current target of spending 2 per cent of gross domestic product on defence. Right now, the country spends about 1.37 per cent, but Prime Minister Justin Trudeau’s government has pledged that Canada will reach 2 per cent by 2032.

“I’m going to ask all NATO nations to increase defence spending to 5 per cent of GDP, which is what it should have been years ago,” Mr. Trump told the World Economic Forum.

“It was only at 2 per cent and most nations didn’t pay until I came along. I insisted that they pay, and they did, because the United States was really paying the difference at that time, and it was unfair to the United States.”

Mr. Trump has previously threatened to withdraw from NATO if member countries don’t increase defence spending. He did not repeat this threat Thursday.

Nonetheless, Stephen Saideman, a defence expert at Carleton University, said he thinks Mr. Trump’s demand is a “bad-faith” request aimed at providing him a pretext for withdrawing.

Mr. Trudeau did not directly respond to Mr. Trump’s 5-per-cent proposal but defended Canada’s military spending record, saying his government has raised defence expenditures and that Canada is on a path to reach 2 per cent.

“We’re going to continue with our NATO partners to make sure we’re doing everything necessary to keep Canada safe,” adding later that this country is on a strong track to invest in “protecting the North and protecting Canadians in a complicated world.”

The federal government under Mr. Trudeau has yet to publish a fully funded plan to raise military spending to 2 per cent of GDP.

Mr. Trump’s call for more allied defence spending takes place as European leaders themselves urge more military expenditures in the face of Russian aggression.

Former Alberta premier Jason Kenney, who also once served as Canada’s defence minister, cast doubt on the wisdom of NATO countries boosting military spending to 5 per cent of GDP. He said Mr. Trump is right to point out that the United States has shouldered an unfair share of the collective defence burden and said Canada must reach the 2-per-cent target quickly.

“Even though I’m a defence and security hawk, I have to express a degree of skepticism about the new 5-per-cent target that’s suggesting all of NATO should be back to full Cold War levels of spending,” Mr. Kenney said. “While there are real emerging threats from China and Russia, they’re not of the same massive strategic nature as the Cold War.”

Mr. Trump’s speech to the World Economic Forum harshly criticized many U.S. allies but he reserved some of his most scornful comments for Canadians and reiterated a persistent complaint about a trade imbalance with Canada.

“We have a tremendous deficit with Canada. We’re not going to have that any more. We can’t do it,” Mr. Trump said. “You can always become a state, and if you’re a state, we won’t have a deficit. We won’t have to tariff you.”

The new President has threatened to impose 25-per-cent tariffs on Canadian imports as early as Feb. 1. He has also given his administration the task of exploring a range of trade measures, including tariffs, aimed at reducing America’s trade deficit with other countries. The deadline for these studies is April 1.

Mr. Trump also played down the notion that Canada has leverage over the United States because of the products Americans buy from Canadians.

“We don’t need them to make our cars, and they make a lot of them,” Mr. Trump said of Canada. “We don’t need their lumber, because we have our own forests. We don’t need their oil and gas. We have more than anybody.”

He repeated the incorrect claim that the U.S. has a “$200-billion or $250-billion” trade deficit with Canada. In fact, the latest data suggest the annual U.S. trade deficit in goods with Canada is around $100-billion (Canadian). This number shrinks to around $65-billion when services are included, as the U.S. sells more services to Canada than it buys.

Foreign Affairs Minister Mélanie Joly, speaking to reporters in Ottawa, said she has pleaded Canada’s case to U.S. Secretary of State Marco Rubio and will head to Washington next week to talk to him and others. She said the Trump executive order calling for studies on trade with Canada gives Ottawa something to work with. “We will participate in the process that is highlighted in the executive order,” she said.

Mr. Trump also called on OPEC oil-producing countries to ramp up production to lower the global cost of oil. And he said that he would “demand that interest rates drop immediately,” a shot at the U.S. Federal Reserve, which sets interest rates independently from the U.S. government.

Mr. Trump initially threatened to impose a 25-per-cent tariff on Canadian imports if Ottawa did not address border-security concerns about drugs and illegal migration. Ottawa responded by announcing a $1.3-billion package to boost border security. Mr. Trump has nonetheless persisted with his tariff threats.

Ottawa has said that it will retaliate against any U.S. tariffs. Canada’s first round of retaliatory tariffs would cover $37-billion of U.S. imports, The Globe and Mail reported. These would be the least painful countertariffs because they would cause the least economic damage to Canadians, federal officials said. Depending on how hefty initial U.S. tariffs on Canada are, Ottawa would then move to tariffs covering another $110-billion or so of American goods.

Mr. Trump laid out his plans to implement an “America First Trade Policy” in an executive order on Monday. He told his administration to investigate a range of potential trade measures, including a “global supplemental tariff” on all imports, anti-dumping measures, and an “external revenue service” to collect payments from other countries.

Mr. Trump also called for consultations to begin on the United States-Mexico-Canada Agreement, the continental trade deal he negotiated during his first term in office to replace the North American free-trade agreement.

The USMCA is up for review in 2026, but a report from the Wall Street Journal earlier this week said the Trump administration is threatening tariffs on Canada and Mexico in an effort to speed up renegotiation of the trade agreement. Mr. Trump denied the report.