Carney’s Defense Agenda Promises Billions in Economic Gains
CIBC economists say Carney’s C$31B defense boost could generate C$64B in economic output—fueling both military readiness and national growth.
Editorial Team (ET)June 19, 2025
Prime Minister Mark Carney’s renewed focus on defense spending isn’t just about military readiness—it could also be a shot in the arm for the Canadian economy. According to economists at the Canadian Imperial Bank of Commerce, the C$31 billion in defense outlays planned through 2029 could generate as much as C$64 billion in economic activity.
That estimate, from CIBC’s Benjamin Tal and Katherine Judge, highlights the broader economic impact of military investments. The increase in spending is expected to fuel growth through production, job creation, and procurement demand across various sectors. “This is more than just defense,” Tal noted in the report. “It’s a national economic strategy.”
Still, how the spending is financed matters. If the government relies on tax increases or cuts to other programs to fund the initiative, the economic return could shrink. Similarly, if the spending increases long-term interest rates through debt financing, the multiplier effect may weaken.
Carney’s pivot to defense was, in part, sparked by continued pressure from U.S. President Donald Trump, who has repeatedly criticized Canada for falling short on NATO obligations. Canada currently spends about 1.4% of its GDP on defense—well below the 2% guideline set by NATO members. Carney has committed to not only hitting that target by 2030 but preparing for an anticipated increase to 5%.
At the same time, Carney is looking to shift Canada’s military partnerships away from a heavy reliance on the United States. Nearly 75% of Canadian defense spending has historically flowed south of the border. Now, Carney wants to deepen ties with Europe. During a recent meeting with French President Emmanuel Macron, the Prime Minister laid the groundwork for Canada to join “Readiness 2030,” a major European defense procurement effort, by July 1.
This realignment marks a significant strategic and economic shift. Rather than remaining tethered to U.S. supply chains, Canada is aiming to integrate more deeply into Europe’s defense infrastructure. That move could benefit domestic industries and reduce foreign dependency.
Defense Minister David McGuinty echoed the urgency behind the plan. Speaking Wednesday, he said the government is taking “immediate and decisive action” to rebuild Canada’s defense capabilities. That includes investments in modern equipment, personnel training, and infrastructure upgrades.
The message is clear: defense is no longer just about security—it’s about sovereignty, economics, and positioning Canada for the future. If the projections hold, Carney’s military push may not only answer Washington’s calls for more spending—but also deliver a homegrown economic boost when the country needs it most.
