Canada First: Embracing Defence Industrial Sovereignty in an Uncertain World
On February 15, 2026, the Canadian government unveiled a transformative Defence Industrial Strategy in Ottawa, marking a decisive shift toward rebuilding national industrial sovereignty in the defence sector. This policy represents a fundamental choice: move away from heavy reliance on foreign – primarily American – suppliers and prioritize domestic companies for military acquisitions. Historically, only about 50% of Canada’s military purchases have benefited local firms. The new strategy sets an ambitious target of increasing this to 70% over the coming decade, fundamentally reshaping the country’s military production ecosystem.
The strategy’s core rationale is rooted in a recognition of global instability. As stated in the official document, “In this uncertain world, it is more important than ever that Canada has the capacity to support its own defence and protect its own sovereignty.” This reflects a doctrinal evolution, emphasizing self-reliance amid geopolitical tensions, including strained trade and political relations with the United States. A key focus is the protection of Canada’s vast northern and Arctic territories, described as a “strategic area for Canada’s defense” and underscoring the need for a “secure North.”
The financial commitment is substantial. The strategy includes targeted contracts and investments totaling C$6.6 billion (approximately €5.5 billion), aimed at relocating and consolidating military production domestically. This is projected to create 125,000 new jobs over the next ten years in a sector that already supports more than 81,000 positions. Beyond job creation, Ottawa aims for a 50% increase in defence exports and a staggering more than 240% rise in total sector revenues. Achieving these goals will require significant technological upgrades, greater integration of small and medium-sized enterprises (SMEs) into defence supply chains, and a deliberate push to position Canadian industry as a competitive global player.
This pivot occurs against a backdrop of escalating defence ambitions. Reports suggest Canada is contemplating raising military spending to 5% of GDP by 2035, a dramatic increase from current levels. If the 70% domestic preference is realized, it could inject over C$5.1 billion in additional annual revenue into local companies. Public procurement is increasingly viewed as a powerful tool of industrial policy. Yet challenges remain evident: since January 2025 alone, the Canadian military has awarded 1,094 contracts worth over C$1 billion to U.S. firms. General Dynamics secured C$460.8 million across 42 contracts, while IT deals totaling nearly C$50 million went to Microsoft, IBM, and Amazon Web Services.
The strategy’s “build at home” ethos seeks to enhance military readiness, reduce vulnerabilities in supply chains, and foster innovation. By prioritizing Canadian firms, Ottawa hopes to ensure quicker maintenance, upgrades, and adaptations tailored to national needs – particularly in harsh Arctic environments.
Major Canadian Arms and Defence Companies and Their Products
Canada’s defence industry, while not as large as those of major powers, features several key players with specialized capabilities in land systems, aerospace, naval technologies, simulation, soldier systems, and small arms. Many operate as subsidiaries of global firms but maintain significant Canadian operations, employing domestic workforces and contributing to local supply chains. These companies supply the Canadian Armed Forces (CAF) and often export to NATO allies, aligning with interoperability standards.
- CAE (ranked as Canada’s top defence company in recent assessments): A global leader in simulation and training. CAE provides advanced flight simulators, mission rehearsal systems, and digitally immersive training for air, land, and naval forces. Its products support CAF pilot training and are used by NATO partners for operational readiness.
- General Dynamics Land Systems-Canada (based in London, Ontario): Specializes in armoured vehicles and land systems. It has historically produced the Light Armoured Vehicle (LAV) series, including variants like the LAV III (used by CAF as the primary infantry fighting vehicle) and exports to NATO allies such as Australia and Saudi Arabia. The company also contributes to ammunition and tactical systems.
- Rheinmetall Canada (Saint-Jean-sur-Richelieu, Quebec): A major systems integrator for land defence. Key products include the Integrated Soldier System (ISS) suite (networked soldier gear with radios, GPS, battle management apps, and accessories), the MASS Multi Ammunition Softkill System for naval defence (on Halifax-class frigates), 40 mm close area suppression weapons, and maintenance/overhaul for Leopard 2 tanks. It supplies extensively to CAF and supports NATO-compatible solutions.
- Bombardier (Quebec-based): Primarily known for business jets, but its platforms serve defence roles in surveillance, reconnaissance, and special missions. Aerostructures and components support military aircraft programs, with applications for CAF and allied forces.
- Lockheed Martin Canada (Ottawa-headquartered): Focuses on advanced technology integration, including naval combat systems, aircraft training, and sustainment. It supports CAF programs like in-service support for platforms and contributes to broader NATO initiatives through parent company expertise (e.g., F-35 components).
- RTX (Raytheon Canada): Provides radars, sensors, and over-the-horizon systems. Products include advanced surveillance radars and mission support, used in CAF air and naval defence, with strong NATO interoperability.
- Colt Canada (Kitchener, Ontario; subsidiary of Colt CZ Group): Canada’s premier small arms manufacturer and the Department of National Defence’s designated “centre of excellence for small arms.” It serves as the sole supplier of the C7 rifle family (including assault rifles like the C7A2 and carbines like the C8A3) to the CAF, with variants battle-proven in diverse environments from Arctic cold to jungle conditions. Other key products include the C6A1 FLEX General Purpose Machine Gun (first machine gun built in Canada since WWII, used by infantry and vehicle-mounted), the C9A2 Light Machine Gun, the C19 (Canadian Ranger Rifle in .308 WIN to replace older models), and the EAGLE side-loading 40mm LV grenade launcher. Colt Canada also handles repair, overhaul, upgrades (e.g., midlife upgrades for C7/C8/C9/C6 systems), technical publications, and training support as the official 3rd/4th line service centre for CAF small arms. The company exports internationally, with recent major contracts including 26,000 C8 Modular Rail Rifle carbines to Danish Defence (a NATO ally) in 2025, and supplies to other partners like the UK for C8 spares. It is positioned to benefit significantly from the new strategy, including potential upcoming contracts for the Canadian Modular Assault Rifle (CMAR) program, an evolution of the C7/C8 family, with deliveries potentially starting in 2026.
- Other notable players include MDA Space (satellite systems and geointelligence, e.g., Sapphire military satellite for space situational awareness), Irving Shipbuilding and Davie Shipbuilding (naval vessel construction and MRO), and smaller firms like those producing ammunition (e.g., General Dynamics Ordnance) or soldier equipment.
These companies collectively span air, land, sea, space, and infantry domains, with strengths in Ontario (combat vehicles, small arms, aircraft parts), Quebec (aircraft MRO, munitions), Atlantic Canada (naval shipbuilding), and Western/Northern regions (aircraft and naval MRO). Exports often target Five Eyes partners and NATO, with the U.S. as the top market historically, though the new domestic focus could boost intra-alliance sales from Canadian firms.
The strategy’s success hinges on overcoming integration challenges for SMEs, accelerating innovation, and navigating international alliances. By fostering a more autonomous defence base – bolstered by domestic champions like Colt Canada – Canada aims not only to bolster its sovereignty but also to emerge as a more influential contributor to collective security in NATO and beyond.
