Canada shifts defence spending toward homegrown industry

Canada is preparing a major overhaul of its defence procurement strategy aimed at strengthening domestic industry and reducing reliance on U.S. military suppliers. According to Canadian media reports, the plan would direct 70% of Canadian Armed Forces procurement contracts to Canadian companies within the next decade, marking a significant shift in how Ottawa sources weapons and defence technology.

Under the strategy, small and medium-sized defence firms are expected to receive $6.6 billion from a planned $81.8 billion defence budget. Investments will target not only traditional military equipment, but also emerging capabilities such as artificial intelligence, data processing, drones, and cloud-based systems. Priority areas include ammunition, aviation platforms, air and underwater drones, and digital defence infrastructure.

Federal officials estimate the policy could create up to 125,000 jobs over ten years, adding to the more than 81,000 people already employed in Canada’s defence sector. The document also calls for a 50% increase in defence exports, positioning Canadian firms to compete more aggressively in global arms markets.

The strategy reflects growing concern about Canada’s dependence on the United States. Prime Minister Mark Carney previously noted that about 75% of Canada’s military spending currently flows to U.S. suppliers, calling the imbalance “not smart” in an increasingly uncertain geopolitical environment. Public broadcaster CBC reported the strategy bluntly states that “Canada cannot outsource its defence.”

Where domestic capacity falls short, Canada plans to deepen cooperation with European and Indo-Pacific partners. Ottawa has joined the EU’s Re-Arm Europe framework and formally entered the SAFE programme, enabling Canadian firms to compete for European defence contracts. These partnerships were discussed at the Munich Security Conference, underscoring Canada’s push for greater strategic autonomy.

Key Takeaways

• Canada plans to route 70% of defence procurement to domestic firms.

• The strategy could create 125,000 jobs and boost defence exports by 50%.

• Ottawa aims to cut reliance on U.S. arms while deepening EU partnerships.

Canada shifts away from US: Joins EU defence push