This article originally appeared in CDA Institute.
By Stephen Nagy, July 3, 2025
The reported commitment by NATO members to spend 5% of GDP on defence represents a seismic shift in alliance burden-sharing, a shift that should have occurred years ago without requiring threats from President Donald Trump or Russia’s invasion of Ukraine. Canada and many European allies have been serial delinquents when it comes to defence spending, exploiting American security guarantees as free-riders, as Michelle Haas and Tim Haesebrouck aptly described while investing their peace dividends elsewhere. This reckoning was inevitable, and our failure to prepare for it reflects a dangerous misreading of global power dynamics since the post-Cold War period.
NATO’s 2% GDP defence spending target was itself a compromise that many members, including Canada, routinely ignored. Canada’s defence spending has hovered around 1.3-1.4% of GDP for years, despite repeated commitments. In 2023, only 11 of 31 NATO members met even the modest 2% threshold. This chronic underspending represented not fiscal prudence but strategic parasitism that relied on American military might while directing resources toward domestic programmes. What is worse, many underspent while criticizing the U.S. as the global policeman or a country that only understood the use of military force and not the nuance of diplomacy.
The numbers are stark. While the United States consistently spent 3.3-4% of GDP on defence, carrying approximately 70% of NATO’s collective defence burden, Canada allocated less proportionally than countries like Estonia (2.7%), Poland (3.9%), and Greece (3.0%)—nations with far smaller economies facing more immediate threats. Former Prime Minister Justin Trudeau’s government repeatedly promised to not reach 2% “eventually,” pushing targets to 2032 and beyond, essentially betting that American patience was infinite.
That it required President Trump’s blunt threats to catalyze action reveals an uncomfortable truth, that traditional and long-term diplomatic pressure had failed (since the end of the Cold War) to spur U.S. allies to take their security seriously and to fairly distribute the burden of their security with Washington. In Canada’s case, defence spending has been declining since the late 1950s.
Previous American administrations, from Obama to Biden’s first term, employed careful diplomacy and strategic patience, receiving only token gestures in return. Trump’s transactional approach, or as some would call it gangsterism and a modern-day protection racket, threatened to abandon Article 5 commitments for non-compliant members and to impose tariffs on recalcitrants. These threats shattered the comfortable assumption that American security guarantees were unconditional.
This wake-up call should have come from observing global trends, not American ultimatums. Russia’s military modernization began in 2008, China’s military budget has grown by double digits for two decades, both nations have systematically challenged the rules-based international order, and the U.S. has attempted to pivot towards Asia since Obama. Yet Canadian and European leaders remained wedded to a post-Cold War fantasy where military power was obsolete and economic interdependence guaranteed peace. Even Russia’s invasion of Ukraine was not enough to fundamentally change the “all politics is domestic” mantra.
The failure of Western idealism is the root cause of where Canada and the EU find themselves today. Former Prime Minister Trudeau epitomized this idealistic blindness. His government’s foreign policy emphasized feminist foreign policy, progressive cultural issues, decolonization efforts, climate action, and multilateral engagement—some of which were worthy goals in a stable world, but inadequate responses to authoritarian aggression. Like many European leaders, Trudeau failed to grasp that international politics had reverted to its historical norm, a competition for comprehensive power where comprehensive power, including military capabilities, remains the basis for pursuing national interests. This is despite Trudeau’s initiative to recapitalize the Canadian Air Force (CAF).
This wasn’t mere oversight but arrogance. There seemed to be a belief that the American-led order was self-sustaining and that middle powers in the traditional sense could indefinitely free-ride while lecturing Washington on values. German leaders proclaimed “Wandel durch Handel” (change through trade) while becoming dependent on Russian energy.
Canada celebrated its “soft power” while its military equipment rusted and recruitment plummeted. The assumption of the Trudeau government and arguably governments before Canada’s lost decade was that all politics were local. Leaders believed that domestic spending always trumped defence, allowing them to ignore that local prosperity depends on global stability.
China’s authoritarian rise, Russia’s invasion of Ukraine, North Korea-Russia cooperation, India’s emergence as a pole and a U.S. neighbour that is no longer wed to multilateralism is our new reality. Canada and other middle powers are now facing a quasi-multipolar world where comprehensive national power which includes military, economic, technological, and diplomatic power determines influence. The comfortable post-1991 unipolar moment has ended. China’s GDP has grown from $1.2 trillion in 2000 to over $17 trillion today, with military spending to match. Russia, despite economic constraints, has demonstrated in Ukraine that military force remains a tool of statecraft. Regional powers from Turkey to India pursue independent strategies based on capabilities, not Western preferences.
In this environment, international law and democratic norms matter only when backed by hard power. The UN Security Council’s paralysis over Ukraine, the failure to prevent South China Sea militarization, and the collapse of arms control treaties demonstrate that without military deterrence, rules become suggestions. Middle powers like Canada face a stark choice today, to invest in comprehensive defence capabilities or accept irrelevance in shaping the international order.
Notwithstanding, defence spending must be smart spending based on each country’s comparative advantages. To illustrate, reaching 5% GDP doesn’t mean scattering resources inefficiently. Canada and NATO allies must focus spending on comparative advantages and regional specializations. This targeted approach maximizes collective defence while avoiding duplication.
For Canada, Arctic defence represents the obvious priority. With the Northwest Passage becoming navigable and Russia militarizing its Arctic frontier, Canada should consider nuclear-powered submarines capable of under-ice operations (following Australia’s AUKUS example) or equivalent. Ottawa needs to also acquire over-the-horizon radar systems replacing the obsolete North Warning System, icebreakers matching Russia’s 40+ vessel fleet (Canada currently has 18, many aging) and Arctic-capable F-35s with northern basing infrastructure.
Without smart, focused investment, these kinds of initiatives are not only unrealistic but a misuse of limited resources.
In the case of European NATO members, they should concentrate on land power and regional defence. Poland’s purchase of 1,000 K2 tanks and 600 K9 howitzers from South Korea represents smart procurement of proven systems that were delivered quickly rather than expensive development programs. Germany’s commitment to resurrect its armored divisions, France’s nuclear modernization, and the UK’s focus on naval power demonstrate effective specialization.
In the Indo-Pacific, burden-sharing already follows this model. Japan’s December 2022 decision to double defence spending to 2% GDP by 2027 emphasizes missile defence and naval capabilities. Australia’s AUKUS submarine program, despite costs exceeding $200 billion USD, provides crucial undersea capabilities for deterrence in its backyard. South Korea’s defence industry supplies advanced systems globally while maintaining massive conventional forces. New Zealand, while smaller, contributes specialized capabilities in maritime patrol and peacekeeping.
Smart procurement means buying proven systems adapted to specific needs. For example, Canada could follow Finland by purchasing 64 F-35s. Finland also maintains 900,000 trained reservists compared with Canada, which has fewer than 30,000 regular forces. Another useful example is the Netherlands’ joint procurement of Patriot systems with Germany, which reduces unit costs while increasing interoperability.
While not a panacea,, Poland’s rapid acquisition of HIMARS, Patriot, and Abrams tanks which were delivered within 18-24 months contrasts with Canada’s 15-year procurement cycles. Another example comes from South Korea’s K9 howitzer, purchased by Poland, Norway, Finland, Estonia, and Australia, demonstrating how allied nations can benefit from common platforms.
China and Russia represent authoritarian challenges to an international order based on rule-of-law. Moscow and Beijing will certainly oppose increased NATO defence spending, but their opposition validates its necessity. China’s military budget has grown from $41 billion in 2000 to over $230 billion today (likely higher given opacity). According to SIPRI, Russia, despite economic constraints, spends at least 6% of GDP on defence. Both nations have invested heavily in anti-access/area-denial capabilities, nuclear modernization, and gray-zone operations designed to fracture Western unity.
Their strategy assumes Western societies lack the will for sustained defence spending. Every NATO procurement delay, every budget cut, every capability gap reinforces their narrative that democracies are decadent and declining. The 5% commitment directly challenges this assumption, demonstrating that democratic nations can mobilize resources when threatened.
For Canada, change must take place as there is no other alternative to alignment. The era of free-riding has ended for Ottawa and other capitals around the world. In a world where comprehensive power determines outcomes, middle powers must choose alignment, and geography dictates that choice. Canada cannot defend its Arctic alone, cannot secure trade routes independently, and cannot deter great power aggression through diplomacy alone.
The 5% commitment seems steep only because we’ve avoided realistic spending for decades. It represents not militarism but realism—recognition that the international order Canadians value requires defending. Former Prime Minister Trudeau’s successor must understand what Trudeau did not, that all politics are ultimately global, that power remains the currency of international relations, and that Canada’s prosperity depends on American power projection backed by allied contributions, even under an unorthodox, unpredictable and sometimes bully President.
The comfortable assumptions of the post-Cold War era have proven dangerously naive. In the emerging international order, Canada faces a simple choice: invest seriously in defence capabilities aligned with American power or accept irrelevance as authoritarian powers reshape global rules. For a nation that has benefited enormously from the American-led order, the choice should be obvious. The only question is whether we will do it voluntarily or wait for the next crisis to force our hand.
Stephen Nagy is a Professor of Politics and International Studies at the International Christian University, Tokyo and concurrently a CDAI fellow, a Visiting fellow for the Hungarian Institute for International Affairs (HIIA) a senior fellow at Canada’s Asia-Pacific Foundation (APF,) and a senior fellow at the Macdonald-Laurier Institute.