Unlock stock picks and a broker-level newsfeed that powers Wall Street.Upgrade Now
US Threats Force Canada’s Liberals to Boost Military Goals
Brian Platt
5 min read
(Bloomberg) -- Canada must quickly ramp up its defense spending to reach its NATO target while also weaning itself off US-made military equipment, according to the contenders to replace Justin Trudeau as prime minister.
The four candidates for the Liberal Party leadership — Mark Carney, Chrystia Freeland, Karina Gould and Frank Baylis — sparred Tuesday during a televised debate over how fast Canada can roll out the billions of dollars in new outlays it would take to bring defense spending up to 2% of gross domestic product. That’s the goal North Atlantic Treaty Organization members have agreed to, and Canada is currently well short of it.
“We really need to act with the fierce urgency of now,” said Freeland, who has said a government led by her would hit the 2% threshold two years from now.
“President Trump has said dozens of times he wants us to be the 51st state. I don’t think any of us wants to be the leader who was asleep at the wheel and didn’t get Canada defended, did not work with our democratic allies to protect our borders,” she said.
The debate in Canada comes as other NATO allies rapidly redraw their plans for military spending after a shocking series of moves by Donald Trump’s administration to loosen US commitments to the security of longtime allies. On Tuesday, British Prime Minister Keir Starmer said his government would increase defense spending to 2.5% of GDP by 2027, rising to 3% over the next decade — funded by cutting the UK’s aid budget.
But the fact that Trump is actively threatening Canadian sovereignty also puts the nation in a different position than Europe. And his threats now loom over the political contest to choose a successor to Trudeau.
Canada must “protect our Arctic, which is under threat not just now from the Russians and the Chinese, but from potential US incursions,” said Carney.
He agreed that Canada must boost its defense spending, but said it should also “leverage all of our assets, from critical minerals to clean energy and well beyond, to harden those partnerships in Europe and in Asia with like-minded countries.”
The comments came in the second and final TV debate of the Liberal leadership race, which is set to conclude March 9. Carney, the former governor of the Bank of Canada and Bank of England, is widely seen as the front-runner. His chief rival is Freeland, the former finance minister whose stinging resignation in December effectively finished Trudeau’s political career.
In 2024, Canada was projected to spend about 1.33% of its GDP on defense. Trudeau announced last July a plan that wouldn’t see Canada reach the 2% target until 2032.
Both Freeland and Gould have promised to accelerate that deadline to 2027, and Gould attacked Carney for his own pledge to get there by 2030. “We don’t have time to wait for this,” she said.
“We will do it faster if we can deploy it faster,” Carney responded. He argued it’s a matter of delivery capacity, “not just pushing money out the door.”
Baylis struck a similar tone, saying he doesn’t see 2027 as realistic. “I don’t think that’s doable in an intelligent way,” he said, noting how difficult it is to do major procurement projects — especially if that procurement is focused on giving the business to Canadian firms.
‘Dumb Tariffs’
As with the French-language debate on Monday, the candidates spent much of their time debating how to respond to Trump’s efforts to start a trade war against Canada. The two countries have a bilateral trade relationship that involves the exchange of more than $900 billion a year in goods and services.
“If you hit us, we will hit back — but our retaliation will be a lot smarter than their dumb tariffs,” Freeland said about her plan. “We’re going to hit Trump’s best friends. I will impose a 100% tariff on Teslas. I’m going to hit Wisconsin dairy. I’m going to hit Florida orange juice. You are going to see a stock market reaction.”
Carney raised the prospect of using Canada’s natural resources as a point of leverage against the US, though he did not explicitly threaten export taxes to drive up the cost of commodities the US needs.
“We are their largest supplier of energy, we are their largest supplier of electricity, we are their largest supplier of uranium,” Carney said. “There are the first signs in the United States now of the economic impact of the Trump policies. We will amplify that and that will begin to create the leverage.”
Tax Plan
In a news conference after the debate, Carney offered more detail on his pledge to cut taxes for middle-class households. The tax reduction would more than offset the loss of a carbon-tax rebate that most people are currently eligible to receive but that would disappear, he said.
With Tuesday’s debate finished, there will now be a sprint to the finish line less than two weeks away. Trudeau will step down as prime minister shortly after the winner is announced.
Once that happens, the new prime minister will have to decide how quickly to call an election. Canada’s Parliament is set to resume March 24, and all three opposition parties have pledged to force an election call at the first opportunity.
But the new Liberal leader could simply call an election before Parliament returns. Carney, for his part, has hinted in interviews he would seek an early mandate from voters to deal with the tariff threats from Trump.
--With assistance from Derek Wallbank.
(Updates with additional quotes and context beginning in the fourth paragraph.)
