Prime Minister Mark Carney is set to announce that Canada will meet NATO’s longstanding defense spending target of 2% of GDP by March 2026. In a speech expected Monday in Toronto, Carney will outline a roadmap to achieve this goal, which has been a point of contention between Canada and its allies for years.

According to sources familiar with the announcement, Carney’s speech will highlight the adoption of a new national defense industrial strategy aimed at boosting domestic arms production. It will also include significant new purchases of drones, armored vehicles, aircraft, and underwater surveillance equipment, especially geared toward strengthening Arctic defense capabilities.

Structural Shifts in Canada’s Defense Posture

One of the most notable changes will be the full integration of the Canadian Coast Guard into the Department of National Defence, moving it from its current position under the Fisheries Department. This structural change is expected to streamline operations and consolidate maritime defense under one command, aligning with practices in other allied nations.

Additionally, military personnel are expected to receive a pay increase, fulfilling a Liberal campaign promise and addressing retention challenges in the Canadian Armed Forces.

International Pressure and Political Timing

The move comes after years of mounting criticism, particularly under former prime minister Justin Trudeau, for failing to meet NATO’s 2% commitment, first agreed upon by member states in 2014. The issue boiled over at last year’s NATO summit in Washington, where Canadian defense policy was publicly criticized by U.S. lawmakers from both parties.

Last week, Defence Minister David McGuinty signaled from Brussels that Carney would address Canada’s defense spending before the upcoming NATO leaders’ summit in The Hague. Former NATO Secretary General George Robertson also revealed that Canadian Industry Minister Mélanie Joly had given assurances that Ottawa would meet the target by the end of the fiscal year.

Canada’s Lagging Defense Contribution

Canada has long trailed its NATO peers in military spending, prompting repeated calls for increased investment from Washington and European allies. The Trudeau government often defended its position by citing contributions in other areas, but allies viewed the lack of a plan to reach 2% as a failure of commitment.

Carney’s announcement represents a strategic pivot as NATO allies intensify military readiness in the face of geopolitical challenges, particularly in the Arctic and Eastern Europe. The defense industrial strategy also appears to address concerns over reliance on foreign suppliers and aims to create high-skilled jobs domestically.