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Carney offers details of defense spending: A sign of a US trade deal? | Forexlive

Canada has made the earlier reporters official: It will boost defense spending to 2% of GDP this year, meeting the NATO target. The spending will go towards new submarines, aircraft, ships, armed vehicles and artillery as well as new radar systems, PM Mark Carney said. The boost in spending comes 5 years ahead of schedule and Carney said investment will continue to rise in the years ahead.

Last week, a series of signs emerged that Canada and the US are close to a trade deal. That was confirmed by the Canada-US ambassador who confirmed secret talks.

The big question is the timeline, with some reports saying they’re hoping to get it done before the June 15 G7 meeting begins in Canada (which Trump will attend). Military spending has been one of the ‘asks’ from the United States and this announcement likely addresses that.

Last week, we also saw Canada hold off on retaliating on steel and Alberta put US liquor back on its liquor store shelves. I see all this as Canada laying the groundwork for a deal. From the sounds of it, this won’t be a complete deal to extend the USMCA but it’s likely to offer some certainty on autos, tariffs and steel.

I expect a deal — if reached — to be a strong tailwind for the loonie.

In his comments though, Carney isn’t exactly cozying up to Trump and that argues that any deal may only be temporary. In his comments, Carney highlighted a threat from the US.

“Middle powers must compete for attention knowing that if they’re not at the table, they’re on the menu,” Carney said. “We will diversify Canada’s defense partnerships.”

“We should no longer spend 75% of our defense budget in the United States,” he said.

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