PROFILE: Canada Finally Emerges from Its Military Lethargy and Reaches NATO’s 2% Threshold

Maxime Marquette

2026-07-06 02:24:42

Carney, the Numbers Man Turned Fiscal Warrior

Mark Carney, former governor of the Bank of Canada and the Bank of England, is not the typical warmonger. That is precisely what makes his announcement more credible in the eyes of allies: a prime minister known for his fiscal discipline does not spend $63 billion by accident or out of short-sighted electoral calculation.

According to the announcement published on the Prime Minister’s Office website, Carney also confirmed an additional investment of more than $3 billion in military infrastructure in Atlantic Canada, a strategic region for monitoring the Arctic and the North Atlantic—two theaters where Russia’s presence is causing growing concern among Western military leaders.

A budget that has yet to prove its effectiveness

Reaching 2% of GDP is a milestone. It is no guarantee that the money will be well spent. Canada has long suffered from chronic delays in its military procurement programs, whether for submarines, combat ships, or fighter jets. The country’s Defense Industrial Strategy points to a potential $180 billion in future procurement contracts—a staggering figure that must translate into actual capabilities, not just press releases.

The Canadian Department of National Defense has specified that this budget is intended to fund both the modernization of conventional forces and new cyber and space capabilities, in a context where hybrid warfare has become the norm rather than the exception.

A central banker becoming the man who makes Canada credible to NATO—there’s something rather ironic about that. But I’ll remain vigilant: promising 63 billion is easy on paper. Delivering that in actual capabilities on the ground is a whole different story.

Canada joins a club it had been avoiding for decades

Last in the class, but finally in the class

This victory must be put into perspective. According to an analysis reported by Politico, Canada now finds itself on par with countries such as Belgium, Albania, Spain, and Portugal—that is, the group of Alliance members that barely meet the minimum threshold, and nothing more. In 2024, Canada was still spending only 1.47% of its GDP on defense—one of the lowest ratios in all of NATO.

This contrast is significant: going from 1.47% to 2% in the space of two years is a real leap, but it does not make Canada a leader within the Alliance. The country remains far behind Poland, the Baltic states, or even the United States in terms of the proportion of its economy devoted to defense.

What the Allies Now Expect

The NATO Secretary General’s report emphasizes the need to maintain this trajectory, not just to reach the target once. The new target of 5% of GDP by 2035 means that Canada will have to more than double its current spending over the coming decade—a colossal budgetary challenge for a country that must also fund healthcare, infrastructure, and the energy transition.

Media outlets such as the CBC and The New York Times have pointed out that this announcement comes at a time when U.S. pressure on European and North American allies to increase their military contributions has never been stronger, particularly under the current U.S. administration.

Being on par with Belgium and Albania isn’t exactly something to be proud of. But I’d rather see a humble Canada that’s making progress than an arrogant Canada that’s stagnating. The bar is low, yes. At least we’ve cleared it.

The Arctic: The West's New, Silent Front in Deterrence

Why Atlantic Canada and the Arctic Are Becoming Priorities

The $3 billion investment announced for Atlantic Canada is no geographical coincidence. This region serves as the gateway to the Arctic, where melting ice is opening up new shipping routes and where Russia has been stepping up its military activities for several years. China, which defines itself as a “quasi-Arctic state,” is also watching these developments with growing strategic interest.

For the Canadian Armed Forces, this means modernizing port infrastructure, strengthening satellite and maritime surveillance, and being able to project a credible presence in a vast and historically underfunded region.

Deterrence Must Be Visible to Be Credible

Military deterrence works only if the potential adversary perceives it as real. A $63 billion budget that remains on paper—without concrete deployments or joint exercises with NATO allies—deter no one. That is why military observers will be closely monitoring the upcoming joint Canadian-American and Canadian-European exercises in the Arctic over the coming months.

The Department of National Defense has mentioned enhanced cooperation with Nordic partners, notably Norway and Denmark—two countries that, like Canada, share a direct Arctic border with Russia’s sphere of influence.

The Arctic is the theater we forget about until the day we can no longer ignore it. I think Canada is playing a smart long-term game here, but I’ll remain skeptical until I see ships and radars—not just numbers in a budget.

Trump, U.S. Pressure, and Canadian Political Calculations

An Ally That Is Finally Responding to Washington

It would be naive to claim that Canada’s decision came out of nowhere. President Donald Trump’s administration has made pressuring NATO allies to increase their defense budgets one of the central themes of its foreign policy, even going so far as to publicly threaten to reduce U.S. commitment to countries deemed to be contributing insufficiently.

On this specific front, it must be acknowledged that Donald Trump’s pressure strategy worked with Canada, just as it has prompted several European capitals to increase their own military budgets over the past two years.

A credit that must be shared, not monopolized

The credit for this increase does not belong to a single man or a single government. It stems from a combination of factors: the war in Ukraine, which has changed the perception of risk in the West; constant U.S. pressure; and a generational shift within Canada’s political class, which has finally come to understand that security is not an optional luxury.

What is certain is that, on the military front specifically, the Trump administration achieved a concrete and measurable result from an ally that had been dragging its feet for decades. On this specific point, the pressure paid off for Western defense.

I am no fan of Trump on just about every domestic issue in the U.S., but I will give him credit for this without gritting my teeth: his pressure on allies’ defense budgets has produced concrete results. Canada is living proof of that.

What $63 Billion Really Buys

Concrete Capabilities, Not Just a Percentage

Behind the symbolic figure of 2% lie very concrete procurement decisions: modernizing air fleets, renewing naval capabilities, investing in cyber defense and space systems, and bolstering the Canadian Armed Forces’ personnel, which have suffered from a chronic recruitment problem for years.

The Canadian government has also emphasized the development of a national defense industrial base, with the stated goal of reducing dependence on foreign suppliers for certain critical equipment—an approach that aligns with that of several European countries since the start of the war in Ukraine.

The Recruitment Challenge: The Achilles’ Heel of the Canadian Forces

Money alone does not solve everything. The Canadian Armed Forces have been facing a personnel shortfall amounting to thousands of unfilled positions for several years. Without qualified personnel to operate the new equipment, the additional funding risks financing equipment that remains on the docks or in the hangars.

This is likely the most underestimated challenge of this announcement: Canada may have the budget of a credible military power without the workforce to fully realize it—a problem shared by many Western militaries facing similar demographic challenges.

You can buy ships. You can’t buy qualified sailors overnight. This is the kind of pesky detail that press releases always forget to mention, and that’s exactly why it needs to be repeated.

A comparison with European allies who have taken the lead

Poland and the Baltic States: The True Model to Follow

While Canada deserves credit for its efforts, it still lags far behind countries that have truly transformed their defense posture since 2022. Poland, for example, spends a share of its GDP on defense that far exceeds the 2% threshold, with ambitions approaching 4% in certain budget scenarios, driven by its direct proximity to the Russian threat.

The Baltic states—Estonia, Latvia, and Lithuania—have also long exceeded this threshold, aware that their territorial survival depends directly on their ability to deter potential Russian aggression.

Canada, Protected by Geography, Less So by Its Efforts

Let’s be honest: Canada enjoys a geographical advantage that Poland or the Baltic states do not. No Russian tank will ever cross the Canadian border. This geographical distance partly explains why Ottawa has been able, for decades, to underinvest in its defense without suffering any immediate or visible consequences.

But modern warfare is no longer just about tanks and land borders. Cyberattacks, information warfare, and threats to the Arctic are making this geographic distance less and less protective—a reality that the Carney government finally seems to have grasped.

Canada has long used its geography as an excuse. That excuse no longer holds water in a world of cyberwarfare and drones. I’m glad to see Ottawa realizing this, even if it took three decades too long.

The reaction of allies and international observers

Washington and Brussels Respond Cautiously

International reactions to Canada’s announcement have been largely positive, though measured. Media outlets such as Politico and The New York Times noted that the announcement came at a pivotal moment for the Alliance, as several member countries are still struggling to meet their budget commitments despite years of repeated promises at successive summits.

CBC reported that this announcement is also part of a broader strategy of Canadian diplomatic repositioning, seeking to strengthen its credibility with its transatlantic partners after years of sometimes strained relations over trade and immigration issues.

A Message to Moscow and Beijing

Beyond the numbers, this announcement sends a clear political signal to Russia and China: Western unity on defense issues remains strong, even if progress varies from country to country. For the Kremlin, which has been hoping since the start of the war in Ukraine for growing fatigue and division within NATO, every new budget announcement of this kind is bad news.

For Beijing, which closely monitors Western cohesion as an indicator of its own strategic maneuvering room in the South China Sea and regarding the Taiwan issue, the message is similar: Western democracies, even those historically most reluctant, ultimately respond to security pressures.

Every additional dollar spent on defense by a Western country sends a message to Moscow and Beijing. This is not empty rhetoric; it is the very logic of deterrence, and Canada has just contributed a little more to it than before.

Internal Criticism and Unanswered Questions

The parliamentary opposition remains skeptical

Not all Canadian political voices have welcomed this announcement with the same enthusiasm. Some opposition lawmakers have questioned the Carney administration’s actual ability to spend this funding effectively, pointing to historical delays in major Canadian military procurement programs, which have often taken a decade longer than expected and cost billions more than budgeted.

Other criticisms center on budget trade-offs: every additional dollar spent on defense is a dollar that isn’t going elsewhere, at a time when Canada faces significant challenges in housing, healthcare, and aging infrastructure.

The Issue of Budgetary Transparency

Another issue raised by several analysts concerns how this 2% figure is calculated. NATO has specific rules on what does and does not count as defense spending, and some countries have in the past been accused of including expenditures that fall on the edge of the official definition—such as military pensions or dual-use infrastructure—to artificially inflate their figures.

The Canadian government asserts that its calculation fully complies with the Alliance’s methodology, but ensuring complete transparency regarding the exact breakdown of these 63 billion dollars remains a process that independent observers will need to monitor closely in the coming months.

I want to believe this figure of 63 billion, but Canada’s budgetary history teaches me to be cautious. A good journalist always checks the fine print, and this announcement deserves the same scrutiny—not blind applause.

The Practical Impact on Canada's Defense Industries

A Potential Boom for Domestic Manufacturers

The Defense Industrial Strategy outlined by the Carney administration, with its potential for $180 billion in procurement contracts, could significantly transform Canada’s defense-related industrial ecosystem over the next decade. Companies specializing in aerospace, shipbuilding, and cyberdefense technologies could see their order books skyrocket.

This economic potential is no small matter in a country that has been seeking for years to diversify its economy beyond natural resources and to develop higher-value-added technology sectors—a goal that aligns here with security imperatives.

The Risk of Dependence on a Limited Number of Suppliers

Historically, a large portion of Canada’s military equipment has come from U.S. suppliers, raising questions about the true industrial sovereignty behind this budget increase. If the $63 billion ends up mostly in the pockets of U.S. defense giants, the economic benefit for the Canadian industry itself will be more limited than the gross figure suggests.

Some analysts are calling for a shift toward European partnerships, particularly with countries like France and Germany, which are also seeking to reduce their own dependence on the U.S. defense industry.

Spending $63 billion is good. Spending it at home or with reliable allies is even better. I’ll be watching closely to see whether Canada actually takes advantage of this windfall to build its own industry, or whether it’s content to be just another customer for Washington.

Upcoming milestones to watch to gauge the sincerity of the effort

The NATO Summit and Accountability

The next major test of Canada’s credibility will be its performance at upcoming NATO summits, where allies regularly compare their respective progress. A single fiscal year at 2% will not be enough: the Alliance will want to see a sustained trajectory, particularly with an eye toward the 5% target by 2035.

Future Canadian federal budgets—especially those following the next election—will be closely scrutinized to determine whether this 2026 commitment survives shifts in the political and economic landscape, a real risk in a democracy where budget priorities often change with each new government.

Actual Equipment Deliveries: The Only True Test

Ultimately, the true test will not lie in press releases but in actual deliveries: how many new ships will actually be launched, how many aircraft will actually be delivered, and how many additional soldiers will actually be recruited and trained. It is this operational reality—more than any percentage of GDP—that will determine whether Canada has once again become a credible military ally or whether it has simply changed the accounting treatment of its chronic underinvestment.

The coming months, as the first concrete contracts are signed under this new budget allocation, will provide a serious initial indication of where this public money is actually going.

I’ll be the first to applaud if Canada truly delivers. I’ll also be the first to call it out if it falls back into its old habits of broken promises. For now, I choose to welcome the gesture while keeping a close eye on things.

What This Announcement Says About Mark Carney's Canada

A Country Redefining Its Role on the Western Stage

Beyond this specific military issue, this announcement is part of a broader redefinition of the role Canada wishes to play within the Western alliance. Under Mark Carney, the country appears to be repositioning itself as a serious partner rather than the friendly but unreliable little cousin of the Atlantic Alliance.

This repositioning comes at a strategic moment: as the United States demands more from its allies and the combined threat from Russia, China, Iran, and North Korea pushes the entire Western world to reassess its collective security calculations.

An Example for Other Hesitant Allies

If Canada—long considered a budget underachiever within NATO—can achieve this goal, it takes away an argument from other member countries that regularly cite budgetary constraints to justify their own delays. This may be the most underestimated effect of this announcement: its psychological impact on budget debates in other hesitant Western capitals.

It remains to be seen whether this Canadian example will truly inspire other reluctant governments, or whether it will remain an isolated case—celebrated once and then forgotten in the archives of NATO government press releases.

If the class slacker finally does his homework, it should put some pressure on the others who are still dragging their feet. I sincerely hope that this Canadian example will serve as a catalyst rather than just a historical footnote.

What this means for North American security as a whole

A Strengthened Canada-U.S. Military Partnership

For the United States, a Canada that invests more in its own defense means a North American partner better able to contribute to continental defense, particularly within the framework of NORAD, which has coordinated air and space surveillance of the entire North American continent for decades.

This strengthened collaboration is particularly relevant in the context of the necessary modernization of missile detection and Arctic surveillance systems—a region where the presence of Russian bombers and submarines has intensified in recent years, according to several Western military reports.

A Sign of Stability in a Sometimes-Tense Relationship

Relations between Ottawa and Washington have experienced significant tensions over trade and immigration issues in recent years. This military announcement could serve as a stable common ground between the two capitals—an area where strategic interests clearly converge, unlike other, more contentious issues.

For a Canadian government seeking to stabilize its relationship with its American neighbor on several fronts simultaneously, demonstrating renewed seriousness on defense matters could serve as an implicit diplomatic bargaining chip in other upcoming bilateral negotiations.

Defense is perhaps the only issue where Ottawa and Washington can still look each other in the eye without wincing. Using this common ground to ease other bilateral tensions would be a smart move—provided it doesn’t remain merely a cynical calculation.

What European Allies Really Think About Canada's Awakening

Cautious optimism rather than overwhelming enthusiasm

On the European side, the reaction to Canada’s announcement remains measured. Capitals such as Paris, Berlin, and Warsaw have seen so many unfulfilled budget promises from various NATO members over the decades that they now prefer to judge based on concrete results rather than press releases. Canada will need to maintain this trajectory over several consecutive fiscal years before it is fully regarded as a reliable partner on par with countries that have long since exceeded the 2% threshold.

Some European diplomats, cited off the record in several press analyses, also point out that Canada’s contribution—even at $63 billion—remains modest compared to the combined efforts of Germany or the United Kingdom, two countries that have significantly accelerated their rearmament since the start of Russia’s invasion of Ukraine in 2022.

A Canadian Role to Be Redefined Within the Alliance

This announcement nevertheless opens a window for Canada to redefine its role within NATO, potentially by positioning itself as a key contributor to security in the Arctic and the North Atlantic—two regions where few other member countries possess geographic and operational expertise comparable to Ottawa’s.

If Canada succeeds in carving out this specific strategic niche, it could transform a simple budgetary catch-up into a genuine diplomatic advantage within the Alliance—a challenge that is far from won but one that deserves close attention at upcoming NATO summits.

Respect within NATO cannot be bought with a single budget figure. It is earned over several years through concrete actions. Canada has taken the first step; it still has all the steps that follow to take, and its European allies are watching with a skepticism that I partly share.

Conclusion: A Real Milestone, but There Is Still a Long Way to Go

A victory that must serve as a starting point

Canada has crossed a symbolic and real threshold after a thirty-five-year wait. This is an achievement that deserves to be celebrated—without excessive fanfare—in a world where Western military credibility is tested daily by Russia, China, Iran, and North Korea. But this 2% of GDP threshold is merely a starting point toward the far more demanding 5% target set by NATO for 2035.

The true measure of Mark Carney’s success will not be found in this March 2026 press release, but in Canada’s ability to maintain this fiscal trajectory year after year, government after government, without falling back into the old habits of chronic underinvestment that have marked the last three decades.

A Test for the Entire Decade Ahead

Upcoming NATO summits, future federal budgets, and—above all—the actual delivery of military equipment will determine whether this March 2026 announcement marks a genuine strategic turning point for Canada or merely a temporary peak before a return to old habits. The country’s budgetary history calls for caution, but the current geopolitical context leaves little room for a reversal without serious consequences for Canada’s international credibility.

I conclude this overview with a sense of cautious optimism: I want to believe that Canada has changed for the long term, but I will judge based on the next five fiscal years, not on a single announcement, however welcome it may be.

Signed, Maxime Marquette, columnist