Canadian Prime Minister Justin Trudeau announced he will step down as prime minister and leader of the Liberal Party, ending a tenure that lasted nearly a decade. Trudeau has faced domestic challenges, and his approval ratings have plummeted due to angst over issues like inflation, housing shortages, and immigration. He recently began facing calls from within his own party to step down, and he saw the resignation of Deputy Prime Minister Chrystia Freeland, who was at odds with Trudeau over his response to U.S. President-elect Donald Trump’s tariff threats and government spending plans. With his inner circle crumbling, Trudeau’s position became untenable, prompting his decision to resign.
Parliament will be suspended until March 24, during which time a new party leader will be selected through a nationwide competitive process. In addition to the need for new party leadership, the next federal election will take place no later than October 2025, where Liberals face an uphill battle against the Conservative Party and its leader, Pierre Poilievre, who has called for reducing the deficit, lowering taxes, cutting foreign aid, and eliminating excess government bureaucracy.
Implications for Canada’s Defense Budget
The next prime minister will inherit a defense budget at a crossroads. On the one hand, the government early last year unveiled a new defense policy, Our North, Strong and Free, that called for increased defense outlays over the next 20 years. The policy was released amid increased pressure among NATO allies to increase their defense contributions. NATO has a standing target for members to spend two percent of GDP on defense, but Canada falls well short of that goal – a NATO report estimated Canada spent 1.37 percent of GDP on defense in 2024. In July, Trudeau said he hoped Canada would reach the two percent benchmark by 2032.
However, Trudeau’s government saw the deficit balloon to CAD 61.9 billion ($43.1 billion) in 2023, which is a 75 percent jump from the previous year and more than 50 percent higher than expected. The fiscal shortfall could put downward pressure on government spending, including the defense budget. Before Trudeau rose to power, deficit reduction measures under Prime Minister Stephen Harper’s Conservative government resulted in military cuts. Defense expenditures could possibly face a similar fate this time around, especially if Poilievre becomes prime minister and enacts broad federal spending cuts.
As Canada enters a period of political transition, the next government will face critical decisions about deficit reduction and defense spending. Whether Liberal or Conservative leadership prevails, the balance between domestic priorities and NATO commitments will shape Canada’s path forward in the coming years.
As editor of International Military Markets, North America, Shaun has cultivated a deep understanding of the vast defense markets in the United States and Canada. Shaun's perspective on defense procurement and budget issues has been cited in a variety of defense periodicals, including Defense News and National Defense Magazine. Further, Shaun played an integral role in the development of Forecast International's U.S. Defense Budget Forecast product, which offers an unprecedented level of insight into the Pentagon's acquisition budget. In addition to providing original analytical content for the U.S. Defense Budget Forecast, Shaun oversees an internal defense budget forecasting process involving Forecast International's team of skilled systems analysts following release of the DoD's annual budget request. Shaun is also in charge of managing Forecast International's Weapons Inventory database.
