Canada Hits 2% Defence Spending, NATO Annual Report Confirms

Noah Note

Well, the 2025 Annual Report is out, and NATO has now confirmed that Canada has officially managed to squeeze out 2% spending on defence. After months of pushing through spending, including a $9.3 billion injection of spending, a new compensation package, and multiple new additions to the Defence Team, Canada has officially hit the 2% marker.

Originally committing to 2030, though pushing through to this fiscal year, Prime Minister Mark Carmey has long made spending 2% a major goal of his government since coming to power last year. For the defence file, the 2% achievement comes late, but it is notable in my opinion.

Of course I hate the percentage figure. I find it distracting, a burden on the conversation. I think it doesnt accurately represent the metric of success of which we should judge ourselves. I have never been a fan of the constant back of forth on percentages being some mythical goal reach.

Of course at this time I let that pass, because I knoe that number was inspiration for many. It was the unattainable goal that many, including myself said could not be reached. If it inspired you to work harder, if it lit that fire in your heart that made you grit your teeth and pull through? Than you know what? It matters. It is important.

NATO now has new targets: 3.5% on Core Defence and 1.5% in Defence-Related Infrastructure. Canada has committed to reaching the 3.5% by 2030 and 5% by 2035. The 2% marker now remains primarily symbolic, a show of dedication and commitment to supporting Canada’s national security.

The 2025 Annual Report shows a spending increase of 20% in real terms alongside Canada and European partners compared to 2024, a total USD $574 billion in 2025, corresponding to 2.33% of collective GDP. Furthermore, every member of NATO has now reached the 2% spending marker as of this report.

Furthermore, Canada has also reached the 20% marker for Equipment expenditure as a share of defence expenditure. In plain terms, this is the amount of money NATO states spend on investments of equipment. Often lost is the 20% requirement set out in conjunction with the total spending requirement.

Canada, in this context, spent 21.2% on Equipment expenditure as a share of defence expenditure. Estonia, Albania, and Belgium especially continue to remain below this threshold. Belgium especially sits at just around 13% of spending.

Despite these accomplishments, Canada still remains on the lower end of NATO spending in both categories. We barely spent over the 2% marker, and even then, didn't manage to get much past it. In total, spending jumped from $38,939 million to $54,995 million in comparison to the 2024 report, a jump of just about $16,000 million, or a 41% increase year-on-year.

Breaking it down a bit further, Canada represents about 3.9% percent when looking at it as a share of alliance GDP. When we look at it from the expenditures side of things, Canada represents 2.8% of spending in 2025.

That is a substantial increase, and something that we should be celebrating. It is a monumental achievement to push out a near 50% increase year-on-year. Of course, the Canadian government has been pushing out money at increasingly aggressive rates over the last few months.

Not even just Major Capital Projects. Contracts are being amended to pump out money as quickly as possible. Massive investments in infrastructure have been pushed forward, including the acquisition of new, existing infrastructure in places such as Courtenay and Esquimalt.

Speaking of Major Capital projects... several major projects have been pushed through this year to support the road to 2%. Many of these projects have been pushed ahead several years from their original timelines to support the 2% spending benchmark. This includes:

• Up to $6 billion last May to support the Arctic Over-the-Horizon Radar project.

• Selecting CAE as the strategic partner for the Future Fighter Lead-in Training program.

• Pushing through the Airlift Capability Project – Multi-role Flight Service with Bombardier.

• Pushing through the Enhanced Satellite Communications Project – Polar (ESCP-P) almost three years ahead of schedule by partnering with Telesat and MDA.

• Awarding MDA a new contract under the RCN ISTAR project.

• Awarding MDA even more contracts to provide a new Ground-Based Optical Capability as part of the Surveillance of Space 2 Initiative.

• Pushing through CMAR two years ahead of plan.

• A new $200 million investment in Canadian Space, including in supporting Domestic Launch.

• A new multi-billion dollar investment into the munition supply program and Canada’s munition supply chain.

• A new multi-billion dollar increase in previous investments to support Arctic Development, including the development of the Northern Operational Support Hubs and Northern Operational Support Nodes.

These are just some of the major contracts awarded, not including pending, multi-billion dollar sales for both HIMARS and a Munitions Package for the RCAF. It also isn't discussing minor contract awards for things like Phase II of the CUAS UOR, New Periscopes for the Victoria-class, and awarding a Design Contract for the MSMM.

It isn't talking about new infrastructure in the works, such as the nearly billion-dollar investment in CFB Trenton to begin constructing infrastructure in support of the Strategic Tanker Transport Capability (STTC) project.

It, of course, isn't talking about the recent pay adjustment, nor the recent move of the Coast Guard to the DND, which, while a significant chunk of the CCG budget was already counting as defence spending, injected hundreds of millions into the calculation this year.

Overall, it has been a massive year on the defence file to say the least, with significant investments made to strengthening Canada’s national security. We could go on and on about every amendment and purchase made, even minor projects pushed through. However, I think you get the point.

Canada pulled out all the stops this year to try and reach 2% spending. We really tried our best to get money out the door. Anything that could be pushed up, is. Anything that can be spent quickly was exercised. Of course, this isn't a year in review post. This is a highlight of Canada reaching 2%.

Every accounting trick, everything from the CCG to the CBSA that could be counted? We threw it all in here to meet that 2% spending mark. We tried everything we could, and to give credit, we made it. We did it. Those of you on the Defence Team did it in the year you were given to scrape billions together in a still-broken system.

You should feel proud of yourselves. However, we should be cautious not to use this as an excuse to slow down. We did all this and just managed to get by. We pulled the stops, did the work. The last few months, I don't think anything that could be pushed through wasn't.

We are still at the bottom of the ladder. We are still trying to build a system that works. We have the DIS. The Defence Investment Agency is starting to ramp up, with legislation coming in the next few weeks to set it as its own stand-alone entity.

New projects as part of the next wave are starting to fall under their banner, yet the system is still not there. The mandates and authorities are not there. There is still foundational work that needs to be done.

We have done much over the last year. We have done a lot to push through new spending, new capabilities. We will have a choice on submarines soon. We will have a lot more projects on the horizon.

I guess it's safe to say we survived? Is that a good term? That feels a bit dramatic... It is kinda true. We were all set out, us as in NATO, to reach 2% this year. Canada managed to do that through hell and high water. We came out fundamentally different than what we went in as, with a new Defence Team, a new DIA, and a new strategy.

And all of that just met the bare minimum... I choose to believe it is more a testament. We saw a 41% increase in year-on-year spending. No one can deny that, even with padding the numbers, significant work was done to achieve that goal.

It's a start. The road now is to 3.5% within the next four years. That will require a lot more than this, admittedly. It will require of us the current, high-intensity pace. It will mean real spending on real capabilities to meet that goal. We pulled out almost every trick that we could, and now we have reached the immediate timeline.

You know what? I can't even fault them for that. I would have done the same given the timelines. They did everything they could do, counted every dollar that could be justified to NATO. I would have done similar. I would have pulled out every bullshit trick I could use to reach that number. Evidently, I think they did likely leave some things on the table. I think they had a few other tricks up their sleeve that could have been done but didn't execute on.

I think it's disingenuous to paint this push as a trick, as deceitful. There are real investments here. There is real effort behind this. People worked their asses off to get things done, and guess what? Significant new capabilities are being locked down.

Overall, this is a net good thing for the defence file. There has been real effort, and those of you on the Defence Team should be proud of your accomplishments. You proved me wrong. I said you couldn't, wouldn't do it. I said you would fall short.

Yet you still managed to meet the NATO requirements, and they're the folks that matter. If they say we reached it? I have little doubt in it. Congratulations to all of you. Sadly, there is no rest, no relief. You still have much work to do, and your celebrations will need to be short.

You do good work. You struggled the last year. I heard it, saw it. I don't envy your position. I wouldn't wish to be in your shoes. I can't imagine all you've done, all you have given of yourselves to see this through. Yet sadly, it isn't enough yet. It isn't where we need to be. You've survived, and you have some breathing room, but don't be complacent in your victory. This is only the beginning, and the real challenge is yet to come.

For today though? We relax. We can be a bit happier. We breathe a sigh of relief that we've finally reached a place we haven't been since the Cold War. That in itself is something I like to believe we can all be a bit proud of.