Canada Wants 70% of Defence Contracts at Home, but Its Military Still Depends on the U.S.: New Analysis

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Canada wants more of its military spending to support factories and expertise at home. But redirecting contracts is not the same as replacing the American systems that help its forces operate. A new analysis by Carleton University professor Philippe Lagassé, published in The Atlantic on October 19, 2026, highlights that tension.

Ottawa’s Defence Industrial Strategy aims to award 70% of defence acquisitions to Canadian firms within a decade, while the armed forces remain closely integrated with their U.S. counterparts. The stakes extend beyond where equipment is assembled. They include who can repair it, supply replacement parts and support operations when political relationships deteriorate. Canada’s challenge is to strengthen domestic capacity without creating dangerous gaps in military readiness.

The 70% Target Is a Future Goal, Not a Domestic-Content Rule

Announced on February 17, 2026, the Defence Industrial Strategy commits Ottawa to raising the share of defence acquisitions awarded to Canadian firms to 70% over the next decade. It is a government objective, not a declaration that the target has already been reached. Nor does it mean every aircraft, vehicle or ship must contain 70% Canadian-made components. A contract award and the origin of everything supplied under it are different measures.

A separate number has often been used to describe the starting problem. In October 2025, Prime Minister Mark Carney said more than 70 cents of each dollar of military capital spending went to the United States. That statement concerned capital spending, not the entire defence budget, which also pays personnel and operating expenses. The two percentages should not be treated as an exact before-and-after comparison. For taxpayers, the meaningful questions are how Ottawa measures Canadian participation and whether spending builds capabilities the country can reliably sustain.

Why the New Analysis Looks Beyond Factory Orders

Lagassé argues that buying more Canadian equipment will not by itself replace U.S. support in intelligence, communications and military command networks. His assessment concerns long-established operational dependence, not a new American decision to suspend assistance or a claim that Canada cannot act independently in any circumstances. NORAD provides a concrete example: it is a binational command responsible for aerospace warning, aerospace control and maritime warning.

Canada and the United States share those tasks rather than maintaining two entirely separate continental warning systems. Canadian aircraft and personnel contribute to the arrangement, so the relationship is more than simply receiving American protection. The practical question is how much capacity Canada could retain or replace if cooperation became less dependable. A larger domestic manufacturing sector could improve equipment availability and bargaining power, but it would not automatically reproduce a jointly operated surveillance network. That is why the location of a factory cannot, on its own, measure military autonomy.

Fighter Jets Bring Decades of Support Obligations

Canada’s January 2023 agreement to acquire 88 F-35 fighter jets illustrates how a purchase can establish relationships lasting far beyond delivery. National Defence’s published plan places the first eight aircraft at Luke Air Force Base in Arizona for pilot training, with deliveries to Canada scheduled to begin in 2028. The fleet is intended to serve beyond 2060. Ottawa subsequently launched a review of the acquisition, but reconsidering a procurement does not erase the training, infrastructure and support requirements surrounding it.

National Defence’s April 2026 briefing identified ongoing F-35 obligations covering software updates, aircraft and engine modifications, and technical-data management. Those services are part of keeping an advanced fleet usable, not optional extras after buying the airframes. Canadian companies can still benefit: Ottawa has selected Mirabel-based L3Harris MAS as a strategic partner to explore a Canadian maintenance depot. That would strengthen local servicing capacity without turning the aircraft into an entirely Canadian system. For pilots and technicians, dependable support matters as much as where the purchase contract was signed.

The Navy Combines Canadian Construction With Foreign Technology

Canada’s planned fleet of 15 River-class destroyers offers another example of shared industrial responsibility. Construction is underway at Irving Shipbuilding in Halifax, using a design derived from Britain’s Type 26 frigate. The ships will incorporate Aegis, the American-developed combat technology used to coordinate sensors and weapons, alongside Canadian systems. The result is substantial Canadian shipbuilding work combined with important foreign technology, rather than a choice between a wholly domestic ship and a wholly imported one.

That combination can provide valuable capabilities while creating long-term technical relationships. The Royal Canadian Navy has already described adapting its workforce for the arrival of Aegis-equipped ships. A Canadian welder’s work on the hull and a Canadian technician’s work maintaining electronic systems are both meaningful contributions, but they involve different kinds of control. Building the ship does not by itself give Canada ownership of every software package or design inside it. The procurement debate therefore has to consider support arrangements and access to technical information alongside the location of construction.

An American-Owned Factory Can Still Build Canadian Capacity

The ownership question becomes concrete in London, Ontario. On July 16, 2026, Ottawa announced a strategic partnership with General Dynamics Land Systems–Canada, including nearly C$2 billion over four years for 190 additional armoured combat support vehicles. The planned expansion would take the fleet from 360 to 550 vehicles. The company operates a Canadian manufacturing base but belongs to the American General Dynamics group. Domestic production and foreign corporate ownership therefore coexist in a major industrial partnership.

The Prime Minister’s Office identified a network of more than 600 Canadian suppliers, including Regina’s InterPro, which supplies steel for armoured hulls, and IMP Aerospace in Enfield, Nova Scotia, which produces vehicle components. Those connections support real skills and economic activity even when the parent company is abroad. Neither a Canadian factory address nor a foreign head office answers every sovereignty question, however. The more revealing issues include where critical engineering knowledge resides, whether production can survive disruptions and what rights Canada secures through its contracts. Judging the strategy solely by corporate nationality would miss much of its practical impact.

The U.S. Is Also Canada’s Biggest Defence Customer

Canada is not starting from an empty industrial base. Innovation, Science and Economic Development Canada’s 2026 industry report puts defence-sector revenue at C$17.3 billion in 2024 and direct employment at roughly 37,700. Its broader estimate of 81,800 jobs includes Canadian suppliers and employment supported by workers’ spending; it is not a count of people directly employed by defence manufacturers. These figures describe an established sector with skills Ottawa can build upon.

The same report shows why reducing military dependence is not equivalent to cutting commercial ties. Defence exports approached C$8 billion in 2024, with 63% destined for the United States. A Canadian supplier could therefore welcome more orders from Ottawa while still relying on American customers to support production. Abruptly weakening that relationship could undermine some of the firms the domestic procurement push seeks to strengthen. The practical objective is more choice and resilience, not replacing a two-way industrial relationship with self-sufficiency in every item the military uses.

Building at Home Does Not Mean Buying Everything at Home

Ottawa’s stated approach is “Build–Partner–Buy,” rather than a blanket ban on American equipment. Domestic production gets priority in areas where Canada has, or can develop, strategically essential capabilities. Where building independently is impractical, the government proposes collaboration with trusted allies, followed by foreign purchases when necessary. Carney’s February launch speech linked partnerships to technology transfers and foreign purchases to economic benefits for Canada. This approach recognizes that greater independence need not require manufacturing every component within the country’s borders.

The contract details still matter. In an April analysis for the Canadian Global Affairs Institute, defence economist Craig Stone argued that Canada needs access to information required for operational success while allowing manufacturers to retain their intellectual property. For example, a maintenance team may need technical information to repair equipment without requiring government ownership of every underlying invention. Negotiating those rights can be as important as securing assembly work. A domestic production line provides less security if essential repairs remain beyond Canadian technicians’ legal or technical reach.

European Partnerships Can Broaden Canada’s Options

Canada has taken a practical step toward diversifying its defence relationships through the European Union’s Security Action for Europe, or SAFE, initiative. The participation agreement was signed on February 14, 2026, and the EU Council formally concluded it on June 15. SAFE makes up to €150 billion in loans available to eligible EU member states for defence investment. It is not a €150-billion grant to Canada or a promise to place that amount of orders with Canadian companies.

Canadian participation can nevertheless open doors. National Defence says Canadian industry can provide up to 80% of contract value in eligible SAFE procurements, above the usual 35% limit for other third countries. That creates opportunities for Canadian components and larger industrial partnerships. Access is not guaranteed business, and European partners have their own industrial priorities. Successful diversification therefore requires two-way cooperation: Canada wants its companies to sell equipment abroad while also needing technologies that other countries produce. These relationships can broaden Canada’s options without eliminating foreign reliance.

The Spending Promise Has a Fiscal Price

Expanding domestic production comes as Canada takes on a much larger NATO spending commitment. The Parliamentary Budget Officer’s October 6, 2026, primer explains that the 2035 target comprises at least 3.5% of GDP for core defence and up to 1.5% for broader defence and security-related spending. The latter category can include critical infrastructure and civil preparedness, so the entire 5% should not be read as a weapons budget. Directing more contracts to Canadian firms does not remove the funding challenge.

In one illustrative path, the PBO shows annual core defence spending reaching C$163.6 billion in 2035–36. That is a scenario based on economic assumptions, not an approved annual appropriation, and cash outlays do not translate dollar-for-dollar into the same year’s budget deficit. The case for Canadian procurement must therefore be assessed alongside cost and delivery performance. Jobs and technology development can strengthen the economic argument, but equipment unavailable when needed cannot fulfil its military purpose, regardless of where the invoice is paid.

Success Will Be Measured in Readiness, Not Just Contracts

Ottawa’s strategy provides benchmarks beyond the headline contract share: within a decade, it aims for fleet serviceability of 75% in the maritime sector, 80% on land and 85% in aerospace. These are future targets for functioning equipment, not reported current readiness levels. Meeting them will depend on maintenance staff, spare parts and repair capacity as well as new purchases. The Defence Investment Agency, created in October 2025, is intended to accelerate procurement, but faster approvals are only the beginning.

For factory workers, predictable orders help determine whether companies can hire apprentices, purchase machinery and retain engineering teams. For military personnel, the test is whether equipment is available and works with allied systems during operations. Published progress on deliveries, equipment availability and domestic support capacity would reveal more than a rising contract total. Canada can strengthen its ability to make independent decisions while continuing to operate alongside the United States. The 70% target measures part of an industrial ambition; the decisive question is how much dependable military capability those investments produce.

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