The Liberals have lately been making what sounds like a flashy promise, to increase defence spending to 4 per cent of Canada’s gross national product by the end of the decade.
That might sound as if Canada has made major progress toward fulfilling its commitment to NATO allies to boost defence spending to 5 per cent of GDP by 2035, given that until 2025, the military budget had not cracked 2 per cent of GDP since the Cold War era.
But reality is more complex, made all the more complicated by the Liberals’ refusal to spell out their plans to get to that 2035 goal, which commits allies to spending 3.5 per cent of GDP on core defence budgets and an additional 1.5 per cent of GDP on defence-adjacent expenditures.
A decade of danger, and dithering
First, a refresher on recent history. In 2014, Canada and other NATO allies committed to an increase in defence spending over the coming decade, to a minimum of 2 per cent of GDP. For Canada, that meant a doubling of spending, on that measure.
How did Canada perform on building up defence spending? If nominal dollars are used to answer that question, the answer looks to be: steady progress. As this first chart shows, Canada’s core defence spending, as defined by NATO, rose from $20.1-billion in 2014 to an estimated $71.5-billion in 2026.
But the picture of a gradual buildup, accelerating after 2022, is misleading. In part, that’s because an accounting change in 2017 creates the illusion of a huge jump in spending that year.
In 2017, the Trudeau government began to include expenditures such as military pensions in the official NATO tally of Canadian defence expenditures.
That change was in line with NATO rules – but the Liberal government did not apply that rule change to 2014, making it seem as if there was a sudden bump in spending in 2015.
(It was just a coincidence, surely, that 2014 was the last year of the Conservative government.)
A majority of the increase between 2014 and 2017 was due to the accounting change, not new spending within the Department of Defence.
Setting aside the accounting issue, two other factors blur the picture of Canada’s defence performance within NATO: inflation and currency changes. The alliance adjusts for each by pegging defence expenditures to 2021 price levels, and to a constant exchange rate with the U.S. dollar.
With those two factors held constant, Canada’s military buildup is not quite as remarkable, as this second chart shows.
There is still a bump upward in 2017, but then the adjusted value of Canada’s defence expenditures drifts downward. Add in the effect of the accounting change, and that is a picture of, at best, stagnation.
But that is still not the clearest picture: the NATO target was not a dollar figure, but a proportion of the national economy, of gross domestic product, the notion being that wealthier countries that could afford to spend more, should. And on that basis, Canada’s military buildup from 2015 to 2022 withers, as this final chart shows.
Defence spending fell to 1.18 per cent of GDP in 2022 (the year that Russia launched its unprovoked attack on Ukraine), marginally lower than the 1.20 per cent of GDP expended on defence in 2015, the first full year of the Trudeau government.
On NATO’s benchmark measure of defence spending, the verdict is clear: the Liberal government dithered for most of a decade.
For nearly a decade, Canadian forces in Latvia – visited in 2018 by Justin Trudeau, and 2025 by Mark Carney – have been helping NATO allies stay on guard against Russia.Roman Koksarov/AP; Christinne Muschi/CP
An about-face
By the summer of 2024, the Trudeau government had begun to shift gears, as Canada and its allies reacted to the growing threat from authoritarian regimes, including Vladimir Putin’s Russia. Defence spending for 2024 would hit 1.41 per cent of GDP, still well short of the 2014 commitment (and lower than in 2017). The Trudeau government aimed to meet the 2 per cent commitment by 2032.
Then Mark Carney replaced Justin Trudeau as Prime Minister, and executed an about-face in defence spending. The Carney Liberals campaigned on meeting the 2 per cent commitment by 2030, but Mr. Carney accelerated those plans after the election, announcing that Canada would hit that mark in 2025. (NATO data released last month estimate Canada’s 2025 spending at 2.03 per cent of GDP.) For 2026, NATO figures estimate Canadian core military spending at 2.13 per cent.
Increasing defence spending to 4 per cent of GDP in four years or so might seem daunting, but that promise includes the 1.5 per cent on spending outside of core defence needs. A May press release from the Prime Minister’s Office noted that Canada has already met the requirement to spend 1.5 per cent of GDP on “critical defence and security-related” items.
So, we can start by subtracting those expenditures from the 2030 target of 4 per cent in broad defence spending to arrive at a goal of 2.5 per cent of GDP on core defence needs by the end of the decade.
Bumping defence spending to 2.5 per cent of GDP in 2030 from 2.13 per cent this year might seem like a small lift. But translate those proportions into dollars, and the lift looks a lot bigger. In 2026, Canada is projected to spend $71.5-billion on core military needs. Using the GDP forecasts in the spring economic update, core military expenditures would rise to $97.9-billion in 2030, an increase of more than $26-billion.
By 2030, defence expenditures on a (nominal) dollar basis will have more than doubled, using the above calculations.
A strategic gap
So what is the plan on how to spend those funds? That is the $26-billion question that the Carney Liberals have yet to answer. There have been numerous announcements about spending plans.
And there is a substantial, broad fiscal commitment. In a statement, the Department of Defence said the push to increase core defence spending to 2.5 per cent of GDP in 2030 is fully funded in the current fiscal framework of the federal budget. The spending plan includes submarines and military ships, missile defence, intelligence capabilities and space-based systems, the department said.
Those are all interesting details. But what has been lacking is a detailed plan – from the Prime Minister and Defence Minister David McGuinty – that explains to Canadians what the government’s military spending priorities are, and how those fit into a broad defence strategy.
Is the emphasis on capital ships, or marine and aerial drones that can harass an enemy’s fleet mercilessly, as Ukraine has demonstrated? Will Canada focus on a mobile Arctic-ready infantry force? Or will the spending emphasis be on fully equipping and expanding the army brigade in Latvia?
Canada will have to make choices, and focus its resources, even with the added billions of dollars that Ottawa is preparing to spend. The Carney government needs to lay out its battle plan, and quickly.
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