Prime Minister Mark Carney's recent discussions on Canada's defense spending and his 'long discussion' with former President Donald Trump on a range of issues highlight the intersection between NATO commitments and trade relations, says political analyst Eric Ham.
Defense Spending as a Trade Lever
Ham argues that Canada's ability to navigate its NATO obligations, particularly the target of spending 2% of GDP on defense, could directly impact the future of the Canada-United States-Mexico Agreement (CUSMA). 'How Canada handles its NATO commitments will be a key factor in CUSMA negotiations,' Ham wrote.
Canada currently spends about 1.4% of GDP on defense, below the NATO target. The U.S. has long pressed allies to meet this benchmark, and Trump previously linked defense spending to trade concessions.
Carney's Stance and Trump's Demands
Carney emphasized Canada's contributions to global security but acknowledged the need for increased investment. 'We are committed to doing our part,' Carney said, without specifying a timeline to reach the 2% goal. Trump, during his presidency, repeatedly criticized NATO allies for underfunding defense and suggested trade deals could be conditional on meeting spending targets.
According to Ham, the outcome of these discussions could set a precedent for CUSMA's review in 2026. 'If Canada can demonstrate a credible path to 2%, it may ease tensions and secure more favorable terms,' he noted.
Broader Implications for Canada-U.S. Relations
The link between defense and trade is not new. In 2024, the U.S. Trade Representative cited defense spending disparities in trade negotiations. Ham warns that failing to address NATO expectations could embolden U.S. protectionist measures, potentially jeopardizing Canadian access to American markets.
Canada's former trade chief, speaking anonymously, expects no tariff deal before the U.S. midterm elections, adding uncertainty to CUSMA's future.
As Canada navigates these twin pressures, the decisions made in NATO forums could resonate far beyond the military alliance, shaping the economic landscape for years to come.
