Canada has announced its biggest increase in military and defence spending since the outbreak of the Second World War, news that is seen as positive for military contractors.
At a NATO Summit, Canadian Prime Minister Mark Carney committed that Canada would invest 5% of its gross domestic product (GDP) in defence by 2035.
The 5% will be broken down into two parts, with the first 3.5% aimed at core defence needs such as military jets and weapons.
The remaining 1.5% will be spent on defence-related investments that include naval ships and infrastructure.
Earlier in June, Prime Minister Carney announced Canada would spend an additional $9.3 billion on defence in order to meet NATO’s previous 2% GDP target this fiscal year.
The additional spending is expected to be a boon for defence contractors such as Lockheed Martin (LMT), RTX Corp. (RTX) and Northrop Grumman (NOC).
In all, Canada is expected to spend $62 billion on its military and related defence this year.
In media interviews, Prime Minister Carney said reaching 5% of GDP would amount to Canada spending $150 billion a year on its defence by 2035.
He added that the federal government in Ottawa plans on reaching the 5% target through measures such as developing critical minerals.
U.S. President Donald Trump has long pushed for NATO members to increase their defence spending and publicly complained about allies like Canada taking advantage of U.S. security.
Trump called the new military spending from Canada, and other NATO members, a “big win.”
The stock of Lockheed Martin, the biggest U.S. defence contractor, is down 5% this year and trading at $458.39 U.S. per share.
