Canada Faces $112 Billion Defense Bill to Meet NATO Goal
Canada's parliamentary budget officer estimates that fulfilling NATO's 5% GDP defense pledge would require about C$159 billion (US$112 billion) in core defense spending in 2035-36. The watchdog projects an added deficit of C$63 billion (US$44 billion) that year, with a C$68.2 billion gap over a 2% baseline. The plan creates long-term procurement opportunities for US suppliers, though Ottawa wants Canadian industry to benefit.
The budget office’s February 5, 2026 costing treats the 5% goal as a scenario, not an adopted plan. It models core defense rising evenly from 2.0% of GDP in 2025-26 to 3.5% a decade later, while the separate security portion stays at 1.5%.
By 2035-36, that path would also push federal debt-to-GDP 6.3 percentage points above baseline. Because NATO tracks cash spending, equipment purchases would raise outlays quickly, though budgetary accounting would recognize the expense more gradually.
The projected spending path could reshape Canada’s defense industrial base, creating opportunities for domestic and U.S. suppliers while raising questions about fiscal trade-offs. Taxpayers may face higher deficits or future debt pressures, potentially affecting other budget priorities. Workers in defense manufacturing and related infrastructure could see demand, though benefits may depend on procurement rules and whether Canadian firms secure shares of contracts.