For years, Canada has been under pressure from NATO allies to hit the military alliance’s target of spending at least two per cent of GDP on defence — something experts say cannot be done with the flick of a switch.
Yet that pressure has only grown under the new Trump administration in the U.S.
Last week, the White House said it expects all NATO allies to be meeting the two per cent target by June, when leaders gather at the Hague for the alliance’s annual summit.
Experts who study Canadian defence and financial policy used words like “impossible” and “not realistic” when asked if hitting that June deadline was feasible.
“You’re talking about increasing our defence spending by almost 50 per cent,” said Stephen Saideman, the Paterson Chair of International Affairs at Carleton University and director of the Canadian Defence and Security Network.
“We simply cannot spend that much money that quickly.”
Even getting to two per cent within the next couple of years would be extremely difficult, those analysts say, largely due to the realities and constraints of procuring military equipment. Regardless of when Canada hits the target, the question will then become how to maintain it or raise it even further.
U.S. President Donald Trump has repeatedly raised defence spending as one of his many grievances with Canada.
“They spend very little money on military, on NATO they’re just about last in terms of payment,” he said during a cabinet meeting at the White House on Wednesday.
“We protect Canada, but it’s not fair. It’s not fair that they’re not paying their way. And if they had to pay their way, they couldn’t exist.”
Canada is one of just eight NATO members out of 32 not meeting the two per cent benchmark first agreed to in 2014. It spent 1.37 per cent of its GDP on defence last year, or $41 billion, according to government projections.
The federal government’s defence policy update laid out plans to boost military spending to 1.76 per cent of GDP by 2030. Officials have said they can hit two per cent by 2032 or even earlier, but have not released details on how that will be achieved.
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“We are a proud founding member of NATO, and have a clear, credible and achievable plan to reach the NATO 2% target,” Defence Minister Bill Blair’s office said in a statement. “We’ve also recently reaffirmed our intention to accelerate our defence spending timeline — making significant new investments in the Canadian Armed Forces.
“We want to get this done as quickly as possible, while recognizing that there are decisions that Canada has to make with respect to the availability of the funding required to meet NATO’s 2% target.”
Based on Canada’s current projected GDP of $3.1 trillion this year, it would take about $20 billion to reach two per cent on defence right now. However, annual GDP figures are generally projected to grow over time.
The parliamentary budget officer (PBO), in a report last year, calculated that defence spending would have to reach $81.9 billion to reach two per cent of what it projects GDP to be by 2032.
The Department of National Defence has disputed the PBO report, saying the independent office calculates GDP differently than the defence policy update, which uses NATO figures “to ensure consistency amongst members.”
How can that money be raised and spent?
Kevin Page, a former parliamentary budget officer currently serving as president and CEO of the Institute of Fiscal Studies and Democracy at the University of Ottawa, said in an email that raising the necessary funds to hit two per cent quickly would require “some combination” of budget deficits, spending cuts and increase in revenues — in other words, a tax hike.
A one per cent increase in the GST would generate about $10 billion, according to Page.
He also pointed to the “substantially” higher government program spending under the Liberals — from 13.7 per cent of GDP in 2015 to 16.2 per cent today — suggesting another $10 billion in savings could be found and reallocated to defence.
The question for each of those is whether the government has the political will to carry them out, Page said — and whether Canadians would accept them.
But other experts say budgets need to be spent, and Ottawa can’t simply rush money out the door on the things like new submarines and fighter jets that will help Canada reach two per cent.
“A minimum of two to three years in terms of production timelines is a pretty reasonable time frame for anything not already under discussion,” said David Perry, president and CEO of the Canadian Global Affairs Institute.
“Generally, we don’t make final payments until we actually get stuff. So it’s not like you prepay and then you get the stuff later. That’s generally not how these things work.”
Perry said the war in Ukraine means most available military stocks are depleted because allies rushed to send available military resources to support Ukraine against Russia’s invasion, meaning much of what Canada needs to buy will need to be built new.
Manufacturers have ramped up production but are still strained from worldwide demand.
He said Canada can show allies it is serious about investing more in defence quickly by spending on immediate needs military members have identified like base improvements, building more affordable housing and boosting pay for members.
Last spring’s budget committed $6.9 million over five years, with “$1.4 billion in future years,” to build up to 1,400 homes for military members and renovate 2,500 existing units on bases and wings.
Canada continues to face major challenges in military recruitment. The military is aiming to reach its approved strength of 71,500 regular forces members and 30,000 reserve members by April 2029, but is still short more than 13,000 personnel.
Saideman said the housing and base improvement measures would also take years to deliver on after architecture plans, land assessments and building are completed.
At the very least, Perry said a spending plan could be produced publicly and to allies in time for the June NATO summit.
“We’ve certainly had a lot of time to work on it, and with another four months to cram for the exam, that’s more than enough time,” he said.
Saideman said maintaining two per cent or pushing higher could be the more difficult task.
A change in government to the Conservatives — whose leader Pierre Poilievre has vowed to balance the budget and has not committed to a timeline to reach two per cent — could complicate efforts to spend more on defence at the expense of fiscal restraint.
Both Perry and Saideman said maintaining two per cent of GDP would mean fundamentally changing the way the Canadian military operates — from one that, as Perry put it, “buy airplanes or buy ships every 30 or 40 years” to a more modern and active national security force.
That will require long-term planning and investments that go beyond what’s needed to hit two per cent today, they said.
As for the short-term, Saideman and Perry said there’s one way Canada could potentially hit the NATO target faster: if Trump’s tariffs reduce Canada’s GDP, which economists have predicted.
“If Trump is engaged in a trade war against Canada and causes a recession, we’ll get closer to two per cent because our economy will shrink,” Saideman said.
