Canada to Rebalance Defense Spending Toward Domestic Suppliers

New strategy seeks to flip current U.S.-heavy procurement share and ramp up investment, R&D and jobs in the Canadian defense sector

By Maya Rios LMT

Canada to Rebalance Defense Spending Toward Domestic Suppliers

LMT

A recently released Canadian defense strategy sets targets to substantially increase weapons purchases from domestic firms, reversing the current reliance on U.S. suppliers. The plan includes ambitious investment and industry growth goals while noting the change follows recent U.S. tariffs and has delayed a review of an F-35 purchase.

Key Points

Canada currently directs about 70% of its weapons budget to U.S. suppliers and aims to flip that so 70% of purchases are from Canadian firms - impacting defense procurement and domestic manufacturing.
The defense strategy includes targets to raise government defense R&D spending by 85%, boost defense industry revenues by 240%, increase exports by 50% and create up to 125,000 jobs - affecting R&D, manufacturing and export-oriented sectors.
The policy shift follows U.S. tariffs imposed last year and has prompted Ottawa to reconsider a proposed Lockheed Martin F-35 purchase; the F-35 review has been delayed, creating near-term procurement uncertainty.

Canada has unveiled a defense strategy that aims to shift a large portion of its military procurement to Canadian companies, according to a government document published Tuesday. The plan targets a reversal of the country’s present sourcing pattern, under which 70% of weapons spending goes to U.S. suppliers.

Prime Minister Mark Carney is quoted in the document as saying the current level of U.S. reliance is excessive and the strategy sets out to change that balance so that 70% of weapons purchases will come from Canadian firms.

"In this uncertain world, it is more important than ever that Canada possess the capacity to sustain its own defense and safeguard its own sovereignty," the document stated.

The strategy lays out measurable objectives for the coming decade. It calls for an 85% increase in government spending on defense-related research and development, a 240% rise in defense industry revenues, a 50% growth in defense exports, and the potential creation of up to 125,000 new jobs.

Officials framed the shift as a response to recent trade frictions between Ottawa and Washington. After U.S. President Donald Trump imposed tariffs on key Canadian imports last year, the government signaled it was rethinking a proposed acquisition of Lockheed Martin F-35 fighters and looking at other aircraft options.

That review of the F-35 transaction, which had been expected to conclude several months ago, remains delayed, the document notes.

The strategy sets out an explicit industrial policy objective for the defense sector, emphasizing domestic capacity, expanded R&D investment and export growth as central pillars. It also connects procurement decisions to broader economic outcomes by projecting a large increase in industry revenue and job creation if targets are met.

While the document specifies the numerical goals, it does not provide further detail in this release about implementation timelines or procurement schedules beyond the stated ambition to alter the current sourcing ratio and complete outstanding reviews.

Sectors affected: defense manufacturing, research and development, exports and employment in related industrial supply chains.

Risks

Trade and political tensions - the strategy follows U.S. tariffs imposed last year, a factor that has already influenced procurement decisions and could continue to affect cross-border defense trade.
Procurement uncertainty - the review of the Lockheed Martin F-35 purchase has been delayed, leaving timelines and outcomes for that acquisition unclear.
Implementation challenge - the strategy sets ambitious numerical targets for investment, revenue and job creation but provides limited detail in the released document on how procurement timelines and sourcing shifts will be executed.

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Canada to Rebalance Defense Spending Toward Domestic Suppliers

Key Points

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