Eric Ham: How NATO’s defence showdown puts Canada’s trade deal with the U.S. and Mexico at risk

Prime Minister Carney speaks on Canada’s defence spending and also discusses his recent ‘long discussion’ with Trump ‘on a range of issues.’

Eric Ham is based in Washington, D.C. and is a political analyst for CTV News. He’s a bestselling author and former congressional staffer in the U.S. Congress and writes for CTVNews.ca.

Europe’s leading nations are sending a strong message in the lead-up to the forthcoming NATO Summit. The E5 (European Group of 5)–the U.K., Germany, France, Poland and Italy—are pledging billions of dollars in new arms contracts and more weapons production. This, in an effort to bolster regional security and assist Ukraine as it continues to dramatically shift its war with Russia in Kyiv’s favor.

Yet, while Europe presents a strong unified front, it remains to be seen where Canada stands amid a more aggressive and offensive posture by NATO members. In its own backyard, Ottawa remains in economic purgatory as the USMCA hangs in the balance. President Donald Trump is doubling down on aims to exit the signature trade framework. Europe’s aggressive stance will make it harder for Trump to provide cover for his friend, Vladimir Putin.

Whichever way Carney leans—placating Trump or siding with Europe—could ultimately determine the future of the regional free trade agreement. Since his election in 2016, President Trump has routinely attacked the Western alliance for not living up to its spending commitments.

However, according to the Atlantic Council, a Washington,D.C.-based think tank, in 2025 alone, European allies and Canada increased defence spending by 20 per cent from the previous calendar year, with all allies now exceeding the previous defense spending target of two per cent of gross domestic product.

The threat of a U.S. military retreat

In fact, for the first time in recorded NATO history, a European ally—Norway—has surpassed the United States in defence spending per capita. Data points that will certainly go a very long way in ensuring the ire of the White House. However, this new offensive posture sends a clear and undeniable message to Moscow that the global multinational military bloc is prepared to be a bulwark against Russian aggression, with or without America’s support.

This new stance comes even as the U.S. Pentagon has ended defence programs with European and Canadian allies and questioned placing holds on operations in recent months. Speaking at the NATO defence ministers’ meeting in Brussels, U.S. Secretary of Defence Pete Hegseth derided allies, suggesting some had been “free-riding.” He announced a six-month review of the presence of U.S. forces in Europe saying the review is to “ensure that NATO is moving fast and irreversibly toward Europe leading” on security throughout the continent.

The review comes as the president has been highly critical of member states that refused to aid the U.S. over its war of choice against Iran. Germany, Poland, Spain and even Italy have been threatened with the removal of U.S. forces and other military assets. Canada, too, has come under criticism from Pentagon officials recently. U.S. defence leaders commented that Canadian military officials failed to provide a clear roadmap for the NATO-mandated increase of defence-related spending to five per cent of gross domestic product by 2035.

Prime Minister Mark Carney has said that meeting the NATO five per cent GDP target (3.5 per cent spent directly on the military and 1.5 per cent on defence infrastructure) could potentially cost the federal treasury up to $150 billion annually when fully implemented. Currently, Ottawa spends roughly $63 billion per year on defence.

The $150-billion defence question

Last month, the Pentagon’s director of policy planning, Elbridge Colby, said on social media that the United States “can no longer avoid the gaps between rhetoric and reality” in Canada’s position.

Moreover, it was recently revealed that the United States Army National Guard has shelved participation in an annual Canada-U.S. summit of military officers. Canada’s defence department confirmed the Army Reserve General Officers Advisory Board had stopped meeting.

The statement by the E5 was meant to serve as a clarion call not just for all of Europe but especially to Washington and the Kremlin. Since his return to power, President Trump has prostrated himself before Vladimir Putin.

Echoing Kremlin talking points, dismissing Ukrainian resolve and expressing ambivalence over the pleas of a democratic ally being butchered by a stated U.S. adversary. Yet, as a preview of what is to be expected in Ankara next month, the leaders of Europe’s largest countries are drawing a line in the sand. Commitments made, positions unmistakable, the bloc is united.

Walking the CUSMA tightrope

This time, though, it could be Ottawa, along with Washington, that is on the outside looking in. Prime Minister Carney must walk a tightrope between standing with E5 members and other NATO allies in support of a strong security deterrence in the wake of rising authoritarianism. All the while keeping the United States close, lest the capricious Trump’s ire be radically and inexplicably ignited, leading to a sudden and ignominious exit from CUSMA.

Ottawa’s overtures to India, China, and even Europe have been a welcome and urgent bulwark against an unpredictable U.S. However, Canada’s southern neighbour and (still) biggest trading partner accounts for nearly 20 per cent of its GDP.

A collapse of the trade agreement would mean an immediate recession and a one to two per cent drop in the nation’s real GDP over several years. The annual meeting of the Western alliance carries massive weight as well as tremendous risk for the prime minister. Global security, but also economic stability, are on the line. Navigating Europe’s rapidly shifting and outsized stance on rising threats to democracy is a welcome position that melds perfectly with Carney’s Middle Powers strategy.

Still, a new unified military Western front could push Trump further into a corner on Russia. In doing so, it could not only see the president further undermine NATO, but shatter regional economic stability closer to home with an exit from CUSMA. Like all things with Trump, Carney must tread lightly. The fate of global security and regional prosperity will depend on it.