Canada will award 70% of defence contracts to domestic firms over the next decade as part of a sweeping industrial strategy aimed at creating 125,000 jobs and reducing reliance on American military suppliers, according to a government strategy to be released Tuesday.
The plan calls for increasing military spending to 5% of GDP by 2035 under Prime Minister Mark Carney’s effort to boost Canada’s defence industrial base while navigating trade tensions with US President Donald Trump.
Ottawa seeks to raise the share of defence procurement awarded to Canadian companies from roughly 50% currently to 70% within a decade, generating an annual revenue boost of $5.1 billion for domestic firms, according to a copy of the strategy document obtained by the Financial Times.
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The initiative comes as Canada reviews its 2023 contract for 88 F-35 fighter jets from US manufacturer Lockheed Martin and evaluates competing bids from South Korea and Germany for 12 submarines capable of Arctic operations.
Related: Canada Makes Payments for 14 Additional F-35 Jets Despite Ongoing Review
The strategy adopts a “build-partner-buy” framework that prioritizes domestic production first, followed by partnerships with allies, then foreign procurement only when necessary. Canada will use national security exemptions under trade agreements to favor Canadian suppliers in procurement decisions.
Canada’s 600 defence companies generated $14.3 billion in revenues in 2022 and contributed $9.6 billion to GDP — less than 1% of national output — while employing 81,000 people, according to government figures.
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The plan sets targets to raise equipment serviceability rates to 75% of naval vessels, 80% of army vehicles, and 85% of Air Force aircraft. Current serviceability stands at 54% for the Navy, 55% for the Air Force, and 46% for army vehicles.
Ottawa will establish formal partnerships with select domestic companies, designating them as “national champions” in exchange for research funding, export promotion and infrastructure access.
The strategy identifies 10 priority sectors for sovereign capability, including aerospace, ammunition production, drones, sensors, and space-based surveillance. The aerospace designation could affect debate over the F-35 procurement.
Canada also commits to building new defence relationships with the European Union, United Kingdom, Australia, New Zealand, Japan, and South Korea, moving beyond traditional reliance on the United States.
The announcement was delayed from last week following a mass shooting in Tumbler Ridge, British Columbia. Defence Minister David McGuinty had promised the strategy’s release before Christmas but missed that deadline.
The government allocated $6.6 billion specifically for the Defence Industrial Strategy and plans to invest $81.8 billion in the Canadian Armed Forces over five years.
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