NATO spending plan challenging for Canada
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.
Weekday Evenings
Today's must-read stories and a roundup of the day's headlines, delivered every evening.
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.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Calgary Herald
18 minutes ago
- Calgary Herald
Canada needs to get serious about digital sovereignty and scrapping the DST won't help
Article content In Europe, the revelation that American tech products could be used as a point of leverage sent governments scrambling to review their exposure, and to expand their investments into potential domestic alternatives that could better guarantee national security. Canada needs to chart a similar course, and prioritize diversifying away from our reliance on American tech. Some of this work may be done in collaboration with existing efforts among European partners, but there is no reason why Canada should not be leading in the development of innovative alternatives to the present American-dominated ecosystem. In particular, the past year has shown a growing eagerness among consumers to embrace alternatives to the Big Tech status quo, as evidenced by the rapid growth of users of alternative social media platforms such as Mastodon, Bluesky and Pixelfed. Canada should invest in creative solutions to break out of the existing platform-dominated paradigm and empower domestic champions such as the newly launched Gander Social. In particular, decentralized offerings present an intriguing alternative to empower users, and could deliver a new paradigm of digital communications. The government could lead the way by beginning to migrate its own digital presence away from American-dominated tech. Article content Article content However, the ability for new national champions to thrive in the tech space depends on a market that provides fair opportunities to new entrants. This means a need for strong enforcement of competition rules. Canada could also follow Europe's lead through rules around adversarial interoperability, which requires companies to make sure their products interface smoothly with their competitors, and minimizes the cost to consumers of switching. Canada could also consider stronger privacy enforcement, and rules that demand greater transparency and accountability from large online platforms about the decisions they make. Article content None of this will be easy, and much of it is likely to draw the ire of a U.S. administration that has developed an astonishingly cozy relationship with the same Silicon Valley titans who just a few years ago decried Donald Trump as too dangerous to even give an account to. The DST, which ensures that large tech companies pay their fair share of taxes, should be an important part of Canada's strategy for digital self-reliance, by drawing revenue from the biggest players to seed new alternative information institutions. While it is difficult to backseat drive officials faced with the difficult and delicate task of negotiating with the Trump administration, the speed with which Canada rolled over in cancelling the DST, while apparently getting nothing concrete in return, is a troubling sign. Canada needs a stable and equitable trade relationship with the U.S., but not at the cost of our sovereignty.
Winnipeg Free Press
18 minutes ago
- Winnipeg Free Press
Federal deficit could average $78B over 4 years, think tank warns
OTTAWA – The C.D. Howe Institute predicts Ottawa's recently announced spending plans — which include a much bigger defence budget — will drive its deficits markedly higher in the coming years. In a new analysis released today, the think tank says it expects Canada's deficit to top $92 billion this fiscal year, given Prime Minister Mark Carney's plan to meet NATO's defence spending target of two per cent of GDP. C.D. Howe says it expects deficit growth to slow after that but predicts deficits will still average around $78 billion annually over four years — more than double the level forecast by the parliamentary budget officer before the spring federal election. The Liberal government did not publish a spring budget this year and has said it will instead push the planned fiscal update to the fall. In addition to ramping up defence spending, Prime Minister Carney's Liberals recently pushed forward legislation to accelerate major project development and delivered a one-percentage-point cut to the lowest income tax rate. The C.D. Howe Institute accuses Ottawa of making costly commitments without showing the numbers to Canadians. This report by The Canadian Press was first published July 3, 2025.
CTV News
22 minutes ago
- CTV News
Federal deficit could average $78B over 4 years, think tank warns
Prime Minister Mark Carney speaks with reporters on Parliament Hill in Ottawa on Monday, June 30, 2025. THE CANADIAN PRESS/Spencer Colby OTTAWA — The C.D. Howe Institute predicts Ottawa's recently announced spending plans — which include a much bigger defence budget — will drive its deficits markedly higher in the coming years. In a new analysis released today, the think tank says it expects Canada's deficit to top $92 billion this fiscal year, given Prime Minister Mark Carney's plan to meet NATO's defence spending target of two per cent of GDP. C.D. Howe says it expects deficit growth to slow after that but predicts deficits will still average around $78 billion annually over four years — more than double the level forecast by the parliamentary budget officer before the spring federal election. The Liberal government did not publish a spring budget this year and has said it will instead push the planned fiscal update to the fall. In addition to ramping up defence spending, Prime Minister Carney's Liberals recently pushed forward legislation to accelerate major project development and delivered a one-percentage-point cut to the lowest income tax rate. The C.D. Howe Institute accuses Ottawa of making costly commitments without showing the numbers to Canadians. Craig Lord, The Canadian Press
