Canada achieved a historic milestone in 2025 by meeting NATO's 2% of GDP military spending requirement for the first time since the 1990s, according to the alliance’s annual report. Prime Minister Mark Carney accelerated defense investments after taking office, allocating $9.3 billion CAD to modernize equipment and address personnel shortages. This shift comes as U.S. President Trump intensified pressure on NATO members to meet financial commitments, including threats to withdraw American forces from the alliance.

Canada’s defense expenditure rose to $46 billion CAD last year, up from 1.47% of GDP in 2024. Funds were directed toward recruitment incentives, upgraded housing for troops, and procurement of drones, aircraft, and armored vehicles. The NATO benchmark now positions Canada as one of 11 members still below the 2% threshold, with plans to reach 5% by 2035. Carney emphasized aligning spending with evolving global threats, including Arctic security and cyber warfare.

Strategic acquisitions reflect reduced reliance on U.S. suppliers. Canada is evaluating Swedish fighter jets as an alternative to U.S. F-35s and has invited bids from a German-Norwegian consortium and a South Korean shipbuilder to modernize its submarine fleet. These moves align with efforts to diversify defense partnerships amid Trump’s tariff-driven trade tensions and rhetoric about annexing Canada as the 51st state.

Carney framed the spending surge as both a security and economic necessity, countering U.S. tariffs by prioritizing domestic and European suppliers. Industry Minister Mélanie Joly linked defense deals to job creation, requiring foreign manufacturers to establish Canadian factories. With NORAD joint operations continuing, the Canada-U.S. military relationship remains complex but increasingly autonomous under Carney’s leadership.