NATO Five Per Cent Pledge Puts Canadian Defence Spending on the Clock

European NATO members spent a combined $559 billion on defence in 2025, with Germany's spending rising 24 per cent to $114 billion and Spain's jumping 50 per cent to $40.2 billion, as the alliance pivots toward the new 5 per cent of GDP target agreed at last year's Hague summit. The figures, drawn from NATO's 2025 defence expenditure report and from a recent SIPRI assessment, raise direct pressure on Canada to lay out a credible plan for hitting the alliance's new long-term spending benchmark.

Canada has so far committed to reaching NATO's previous 2 per cent of GDP threshold by 2032, but has not provided detailed projections for the new 5 per cent target by 2035. The federal government's spring economic update tabled Tuesday is expected to include some incremental defence funding decisions, although significant additional commitments will be required if Canada is to meet the alliance's new expectations.

What NATO agreed

At the 2025 NATO Summit in The Hague, alliance members committed to investing 5 per cent of GDP annually on core defence requirements and on broader defence- and security-related spending by 2035. The commitment includes a sub-target of at least 3.5 per cent of GDP on core NATO defence expenditure, with the remaining 1.5 per cent allowed to come from related security investments including border security, infrastructure resilience and other categories.

The new commitment supersedes the previous 2 per cent of GDP guideline that had been in place since 2014. That earlier target had been met by a growing number of NATO members through 2024 and 2025, but a continuing minority of allies including Canada had not yet reached the threshold. The Hague commitment represents both a significantly higher absolute target and a more flexible definition of what counts toward meeting it.

Implementation timelines vary by country, with the heaviest current spenders being asked to maintain elevated commitments and the lighter spenders being asked to ramp up. The 2035 deadline gives countries a decade to plan and execute the spending growth, although the political and budget mechanics of sustained increases at this scale will require domestic consensus that has not yet been built in many alliance capitals.

European delivery

European NATO members have been moving aggressively to meet the new commitments. Germany's 24 per cent year-over-year increase has placed it firmly above the previous 2 per cent target and on a trajectory toward the new threshold. Berlin has announced a series of large equipment procurements, expanded its forces, and invested in border infrastructure that counts toward the broader security spending category.

Spain's 50 per cent jump from $26.8 billion to $40.2 billion reflects a particularly fast acceleration. The Spanish government has linked its spending growth to commitments on Ukraine support and on Mediterranean security. France, the United Kingdom, Italy and Poland have all also expanded defence spending significantly in 2024 and 2025, with Poland in particular leading European NATO in defence spending as a share of GDP.

EU member states' overall defence expenditure reached €392 billion in current prices in 2025, equivalent to 2.1 per cent of GDP across the bloc. EU defence investment specifically reached a record €106 billion in 2024, exceeding the €100 billion threshold for the first time, and is projected to climb to roughly €130 billion in 2025. The combination of NATO and EU frameworks has produced unprecedented coordination and visibility around defence investments across Europe.

Canada's position

Canada's most recent defence spending estimates put the country at approximately 1.4 to 1.5 per cent of GDP, well below the previous NATO 2 per cent target. The previous Liberal government committed to a path that would see Canada reach 2 per cent by 2032, with the Prime Minister's Office citing Arctic infrastructure, naval procurement and submarine acquisition as key components of the plan.

Prime Minister Mark Carney's government has continued the previous timeline but has not yet committed to a specific path for reaching the new 5 per cent benchmark. Federal officials have said publicly that Canada takes the Hague commitment seriously, although the budgetary implications of sustained 5 per cent of GDP spending are substantial. At current GDP levels, 5 per cent would equate to roughly $135 billion to $150 billion in annual defence spending, several times Canada's current commitments.

The federal government's defence policy update, released earlier in 2025, set out a framework for major procurement and Arctic investments. The spring economic update tabled Tuesday is expected to include additional incremental commitments, particularly in naval procurement and Arctic infrastructure. Whether those commitments will be sufficient to credibly anchor a path to 5 per cent remains a matter of significant debate among defence analysts.

Why allies are watching

NATO partners have been increasingly explicit about expectations on Canadian defence spending. The Trump administration in particular has used Canada's spending levels as a recurring point of criticism, although that criticism has been tied to broader trade and political pressures and has not always been tightly correlated with actual NATO planning processes.

European partners have been less aggressive in their public messaging but have been clear in private that the new 5 per cent commitment requires sustained and credible commitments from all members, including Canada. NATO Secretary General Mark Rutte has emphasized that all members must contribute to meeting the benchmark, although his public statements about specific members have been measured.

The credibility of Canadian commitments is connected to broader Canadian foreign policy interests. Canada's positions on Arctic security, on supporting Ukraine, on naval operations in the Indo-Pacific and on international peacekeeping all benefit from being backed by visible defence capacity. The gap between Canadian commitments and Canadian actual spending has been a recurring source of friction in Canadian engagement with allies.

The Arctic dimension

One of the strongest Canadian arguments for sustained defence investment is the Arctic, where climate change, Russian military activity, and Chinese commercial and security interests have combined to raise the strategic importance of Northern operations. The federal government has identified Arctic infrastructure as a priority and has committed to projects including new underwater surveillance, expanded basing and improved transportation infrastructure.

Many of the Arctic investments could potentially count toward the broader 1.5 per cent security spending category under the NATO framework, although the precise classification of specific spending will depend on how the alliance interprets its own definitions. Federal officials have argued that Canada's geography means that broader infrastructure investments contribute meaningfully to alliance security in ways that more compact European countries cannot replicate.

Indigenous communities in northern Canada have been part of the discussion. Several northern First Nations and Inuit communities have substantial economic and policy interests in any Arctic infrastructure investments, and the federal government has emphasized that Arctic security investments will be developed in partnership with affected communities. The recently announced $3.7 billion Indigenous housing package includes significant funding for northern communities, although that funding is not classified as defence spending.

Procurement challenges

One of the most significant constraints on Canadian defence spending growth is procurement capacity. Canada has historically struggled to convert defence dollars into delivered military capability, with major projects routinely running over budget and behind schedule. The naval shipbuilding strategy, the fighter jet replacement program, and various other major procurements have all faced significant difficulties.

Defence procurement reform has been a recurring focus of federal governments, but structural challenges remain. The combination of small Canadian industrial base, complex regulatory frameworks, and political pressures around regional benefits has made Canadian procurement notably slower than that of many comparable allies. Significant additional defence spending without corresponding procurement reform risks producing substantial waste and limited additional capability.

The Canadian Armed Forces have also faced personnel challenges, with recruitment and retention difficulties limiting the operational capacity that even existing equipment can deliver. Defence spending growth that does not address personnel issues will not produce proportional increases in operational capability. Federal officials have indicated that personnel reform is part of the broader defence policy framework, although progress has been slower than committed timelines indicated.

Political dynamics

Domestic political support for defence spending growth at the scale required to meet the 5 per cent target is uncertain. Public opinion polling suggests Canadians are generally supportive of the Canadian Armed Forces and of NATO membership, but support for sustained increases in defence spending in the face of competing budget priorities is more mixed. The combination of inflation, housing affordability, healthcare, and climate spending creates significant competition for federal dollars.

Opposition parties have approached the defence question differently. Federal Conservatives under Pierre Poilievre have criticized Liberal defence spending as inadequate and have committed to faster movement toward the 2 per cent target, although specific commitments toward the new 5 per cent target have been less detailed. The NDP has been more skeptical of major defence spending growth and has emphasized procurement reform and personnel investment over increased headline figures.

The provincial dimension also matters. Defence-related industrial activity is concentrated in specific provinces, including Quebec aerospace, Ontario manufacturing and Atlantic Canada shipbuilding. Provincial premiers have been engaged in advocating for defence procurement that benefits their regions, although their interests often lead them to push for distribution rather than for overall scale of spending.

What's next

The federal government's defence spending plans through the rest of 2026 will be set out through the spring economic update Tuesday, the fall budget, and the next defence policy review. The combination of these documents will give a clearer picture of how the Carney government intends to navigate the gap between current spending and NATO expectations.

NATO's own assessment processes will continue. The alliance produces annual defence expenditure reports that track member commitments against targets, and Canada's progress toward the various benchmarks will be visible through those reports. The next significant alliance assessment is scheduled for the NATO summit later this year.

For Canadian foreign policy, the broader question is how the country positions itself within the alliance through a period of unprecedented defence investment by partners. Canada's historical role as a middle power that contributes specialized capabilities and high-quality personnel rather than headline defence spending faces increasing strain in an environment where alliance partners are visibly ramping up. Whether Canada finds a path that maintains its alliance standing while managing domestic budget pressures will be a defining question of the Carney government's foreign policy through the next several years.