The Canadian government is now set to shift billions of dollars’ worth of military procurement spending away from U.S. defense firms and towards Canadian manufacturers, signaling a significant shift in strategy for one of the most intimate military partnerships in North America.
Canadian Prime Minister Mark Carney’s move to significantly increase military spending was first prompted by calls from U.S. President Donald Trump to meet NATO spending commitments. But as tensions between the two countries continue to escalate, U.S. defense firms are increasingly being left out of the equation in Ottawa’s military procurement plans.
A new strategy for the Canadian defense industry is to be announced this week, and it represents a deliberate move by the Canadian government to cut back its dependence on U.S. suppliers.
Tariffs, Political Pressure, and a Fracturing North American Partnership
Carney’s shift comes against the backdrop of rising tensions with the US government, especially following Trump’s imposition of tariffs on major sectors of the Canadian economy and his frequent assertions that Canada should be the “51st American state.”
Addressing the World Economic Forum in Davos, Carney spoke of a “rupture” in the world order and called for cooperation among medium-sized countries as a way of balancing the power of super-countries. His words were in line with the sentiments expressed during the Munich Security Conference, where German Chancellor Friedrich Merz and French President Emmanuel Macron emphasized the deterioration of the international rules-based order and the pursuit of autonomy in military affairs by Europe.
Like other European countries that have been questioning the reliability of Washington, particularly in the wake of U.S. threats related to Greenland, Canada is also reevaluating the assumption that the United States will always be a reliable security partner.
Massive Military Spending Surge and Domestic Industrial Push
Less than a year after taking office, Carney promised to boost Canada’s military expenditure to a degree that has not been reached since the Korean War. In June, his administration poured 9.3 billion Canadian dollars ($7 billion) into the military to satisfy the 2 percent GDP requirement set by NATO and plans to fulfill the alliance’s new target of 5 percent by 2035.
Traditionally, Canada has been acquiring 70 to 75 percent of its military equipment from the United States, and the two countries’ militaries have been highly interoperable due to their joint programs such as NORAD. However, Carney has been adamant that this will no longer be the case.
Under the new policy framework, Ottawa aims to:
- Increase revenues of Canadian defense suppliers by 240 percent.
- Direct 70 percent of military procurement spending to domestic companies.
- Boost Canadian arms exports by 50 percent.
- Create 125,000 additional jobs in the defense sector over the next decade.
The policy document argues that shifting geopolitical realities and weakening alliances make national defense autonomy essential, explicitly warning that assumptions about peace, alliance durability, and the end of imperial conquest have been upended.
R&D, Arctic Militarisation, and Strategic Reorientation
The plan also aims for an 85 percent increase in research and development expenditures related to the military and has named the Arctic as a high priority area for the Canadian military. This is in light of the increasing concerns about Russian and Chinese actions in the Arctic region.
Margaret McCuaig-Johnston of the University of Ottawa called the plan a “game changer” but expressed doubts about how much of Canada’s military spending would continue to go to American firms.
Fighter Jets, Submarines, and Industrial Diplomacy
Canada is also reconsidering its controversial purchase of up to 88 F-35 fighter jets from the United States. Currently, Ottawa is only committed to buying 16 aircraft, amid criticism that the F-35 is costly and poorly suited to Canada’s operational needs.
Industry Minister Mélanie Joly has criticised the limited domestic manufacturing benefits from the F-35 program, suggesting Canada may instead purchase fewer U.S. jets and supplement them with Gripen E fighters from Sweden’s Saab. Saab has partnered with Bombardier to potentially manufacture the aircraft in Canada, highlighting Ottawa’s push for industrial offsets and local production.
For its submarine fleet, Canada is seeking around 12 diesel-electric submarines, which U.S. shipyards do not produce. South Korea’s Hanwha Ocean and Germany’s ThyssenKrupp Marine Systems are competing for the contract, both offering significant industrial benefits.
Hanwha’s bid has broader economic implications: South Korean officials have explored establishing automotive manufacturing in Canada, and the company has pledged $250 million for a steel beam mill at Algoma Steel, which has suffered layoffs due to U.S. tariffs now reaching 50 percent on Canadian steel.
