What Happened

On March 26, 2026, Prime Minister Mark Carney announced in Halifax that Canada had spent 2% of gross domestic product on defence in the 2025–26 fiscal year, meeting a NATO benchmark it had endorsed but missed every year since the target was set in 2014. The milestone followed a June 9, 2025 pledge in which Carney promised to reach 2% by the end of that fiscal year — roughly five years ahead of the 2032 timeline the previous government had laid out in its 2024 defence policy update.

Ottawa got there two ways. It added $9.3 billion to the Department of National Defence, and it counted about $14 billion in defence-related spending by other departments — among them the Communications Security Establishment, Global Affairs Canada and Veterans Affairs Canada — toward a NATO total of more than $63 billion, a method the alliance permits.

Why It Matters

For more than a decade Canada sat among NATO’s laggards, spending closer to 1.3% while endorsing the 2% goal. The gap drew public criticism from Washington and quiet frustration in Brussels, and it left Canada exposed each time an American administration questioned whether allies were paying their share. Clearing the bar removes that talking point. It does not end the argument.

The reason is The Hague. At the alliance’s summit there in June 2025, leaders agreed to a steeper pledge: 5% of GDP by 2035, split between 3.5% for core defence and 1.5% for security-related investment such as infrastructure, cyber-defence and industrial capacity. Canada signed on. Yet it reached 2% only, in the CBC’s phrase, “by the skin of its teeth,” landing in the alliance’s bottom third alongside Belgium, Spain and Portugal. Climbing from 2% to 3.5% on equipment and personnel is a different order of difficulty: analysts warn it would require tens of billions in additional spending each year and a multi-year fiscal plan Ottawa has not published. Public appetite is uncertain. A 2025 Angus Reid Institute poll found about two-thirds of Canadians backed the 2% target, while nearly as many considered 5% too much.

Much of the new money is meant to address a specific weakness: the defence of North America itself. The centrepiece is the NORAD modernization plan launched in 2022 — new Arctic over-the-horizon radar, northern infrastructure and command upgrades, the largest investment in continental defence in a generation. Ottawa has paired it with a separate package to strengthen Arctic sovereignty, which the government frames as moving Canada “from reliance to resilience” by reducing its dependence on the United States in the North. The logic is strategic as much as financial. As the Arctic opens and threats grow more varied — cruise missiles, drones, hard-to-detect aircraft — the radar chain built in the 1980s no longer suffices, and most of the territory that needs covering is Canadian.

The harder test is delivery. Canada’s procurement system is notoriously slow, and the headline programs are long-dated: 88 F-35 fighters, a new fleet of conventional submarines, and the River-class destroyers, whose first ship is not expected until 2032–33. Spending counts toward the NATO target only when money actually moves, so announcements are the easy part. For Canada’s international position, the stakes are plain. Meeting 2% restores some credibility with allies and blunts American pressure; sustaining the climb toward 3.5%, while rebuilding a hollowed-out military and asserting presence in the Arctic, is what will determine whether Canada is treated as a serious contributor or a perennial free-rider.

What to Watch

  • The fall federal budget — whether it sets out a credible path toward 3.5% on core defence, or leans again on reclassified spending to flatter the figure.
  • How the total is counted — the share attributed to departments outside National Defence, which NATO accepts but critics see as creative accounting.
  • NORAD and the Arctic — progress on over-the-horizon radar and northern infrastructure, the test of whether “resilience” is funded or just announced.
  • Procurement delivery — fighters, submarines and the River-class destroyers, since sustained spending depends on the military’s ability to actually move money out the door.

Sources: Prime Minister of Canada · National Defence backgrounder · CBC News · NATO · Angus Reid Institute