NATO spending plan challenging for Canada

Winnipeg Free Press

03-07-2025

Opinion
How much is $150 billion as an annual government expense?
It's three times the annual Canada Health Transfer, the mechanism Ottawa uses to support provincial health care. In fact, $150 billion as an annual expenditure dwarfs the entirety of federal transfers each year ($100 billion) for health, social programs and equalization.
In other words, it's a lot of money. However, it's also apparently the price of keeping one particularly bombastic president at bay.
Adrian Wyld / The Canadian Press files
Prime Minister Mark Carney
U.S. President Donald Trump has frequently stated that a massive increase in defence spending is table stakes for getting preferential treatment on trade issues.
The connection between defence spending and trade was made patently clear last week in The Hague, where the leaders of NATO countries held their annual summit. NATO has been on tenterhooks since January, when Trump warned member nations that if they did not meet the (then) two per cent of GDP spending target, the world's biggest defence spender would abandon the alliance.
Trump complained, and with some justification, that some NATO countries (including Canada) are failing to meet the existing target. Canada currently spends just over $62.7 billion on defence. In one of his first acts, Prime Minister Mark Carney pumped another $9 billion into the defence budget, which pushed Canada to the two per cent threshold.
However, just as Canada finally fulfilled its NATO spending obligation, the target moved.
Late last month, NATO nations endorsed a plan — first suggested by Trump — to increase defence spending to five per cent of GDP over the next decade, broken down into 3.5 per cent on direct military spending (troops, weapons, munitions) and 1.5 per cent on 'militarily adjacent' things such as roads and bridges, emergency health care and cybersecurity.
For Canada, the new target would eventually mean $150 billion annually on direct and adjacent military spending.
Carney said that over the next five years, Canada can demonstrate increased military spending rather easily in the adjacent category of projects, which could include investments in ports, highways, telecommunications and the development of critical minerals.
It's the direct military spending that has the potential to cast a long shadow over the federal budget.
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Carney said if Canadians support the new spending target, it will mean 'considerations about what less the federal government can do in certain cases.' What federal programs could be impacted? Carney would not say, but when you're measuring increased defence spending in the tens of billions of dollars, you would need to start taking away from Ottawa's other hefty budget lines: transfers to the provinces, infrastructure spending and such programs as Employment Insurance, the Canada Child Benefit and federal pension funds.
There is lots of wiggle room in this 10-year commitment. NATO leaders created a 10-year runway to achieve the new spending target knowing full well that in about three and a half years, Trump should cease to be president ('should,' because Trump has mused about finding a way to sidestep term limits).
Should a Trump acolyte continue his legacy, it's quite likely the pressure to increase military spending will continue. However, there is one very important caveat in this equation that should be considered: the U.S. currently does not meet the new five per cent target.
The U.S. spends roughly 3.5 per cent of GDP on its military, which is the most among NATO allies but still hundreds of billions of dollars below the new target. The U.S. will have to endure a domestic debate about whether this kind of spending is acceptable, even in a world that has been ravaged by conflict.
It is often said that time heals all wounds. Perhaps time could, as well, play a major role reducing the need to spend more money on the tools of war by spending a bit more time and money on finding ways to stabilize global security.