Canada Defence Industrial Strategy Sets 70% Procurement Target

Ottawa Shifts Defence Spending Toward Canadian Industry

On February 20, 2026, in Waterloo, Ontario, Canada advanced its first-ever Canada Defence Industrial Strategy, marking a structural shift in how defence procurement, trade, and industrial policy intersect.

Speaking at BlackBerry’s headquarters, Minister of International Trade Maninder Sidhu framed the strategy as more than military reform. He described it as an industrial transformation.

“For far too long, Canadian defence dollars left this country instead of strengthening our own industries and workers,” Sidhu said. “That ends now.”

The new framework sets a clear target: 70% of Canada’s defence procurement will go to Canadian firms.

A Sovereignty-Driven Industrial Reset

The strategy emerges amid global instability and a weakening international rules-based order. Ottawa argues that supply chains, technological dominance, and defence production are now central pillars of sovereignty.

The government’s objective is direct:

• Keep procurement inside Canada

• Expand domestic manufacturing

• Increase exports by 50%

• Create 125,000 high-paying jobs

• Strengthen supply chain resilience

Sidhu emphasized that Canada already possesses world-class innovation.

“Canada doesn’t need to chase excellence. We already have it,” he said, referencing Canadian firms like BlackBerry in cybersecurity, MDA Space in satellite technology, and AI leaders such as Cohere.

$6 Billion Investment and New Defence Investment Agency

To execute the plan, Ottawa will invest over $6 billion to expand research, innovation, and procurement capacity.

A new Defence Investment Agency will be established with a mandate to:

• Cut red tape

• Accelerate procurement

• Support Canadian firms

• Strengthen industrial capacity

• Position Canadian companies for export

This agency will centralize industrial coordination and fast-track capability development.

The move signals recognition that bureaucratic delays have historically hindered Canada’s defence modernization.

$470 Billion in Decade-Long Opportunity

The government estimates the strategy will unlock:

• $180 billion in defence procurement opportunities

• $290 billion in defence-related capital investments

Combined, this represents nearly $470 billion over the next decade.

Canada’s defence sector already includes nearly 600 companies and supports over 80,000 workers. It contributes close to $10 billion annually to GDP.

Nearly half of Canada’s defence production is exported.

The government wants that number significantly higher.

Trade Diversification and European Access

Sidhu highlighted expanding trade diplomacy as central to the plan.

He confirmed Canada secured historic access to Europe’s SAFE procurement system, becoming the only non-EU country granted such access.

That decision allows Canadian firms to compete for major European defence contracts.

The minister cited recent trade missions to:

• Italy

• Brazil

• Colombia

• Saudi Arabia

• UAE

• Qatar

• Singapore

• South Africa

“Everywhere I go, partners are asking for more Canada,” Sidhu stated.

Export Development Canada has already delivered $700 million in support to nearly 30 defence and security companies.

NATO Commitments and Spending Expansion

The Defence Industrial Strategy aligns with Canada’s pledge to increase defence spending to:

• 2% of GDP in 2025–26 (approximately $63 billion)

• 5% of GDP by 2035

If implemented, 5% would represent one of the most aggressive defence spending expansions in Canadian history.

This policy integrates:

• Domestic procurement reform

• Export expansion

• NATO capability targets

• Industrial competitiveness

Tax Competitiveness and Investment Climate

Sidhu also linked defence expansion to fiscal competitiveness.

According to Budget 2025 measures, Canada now claims the lowest marginal effective tax rate in the G7 — reportedly 4.75% lower than the United States and roughly half the OECD average.

Ottawa argues this strengthens Canada’s position as a destination for defence and aerospace investment.

Strategic Significance

This strategy represents a doctrinal shift.

Defence policy is no longer treated purely as security expenditure. It is now integrated into:

• Industrial policy

• Trade policy

• Workforce strategy

• Export strategy

The 70% domestic procurement requirement signals intent to reduce external dependency.

The 50% export target signals ambition to expand geopolitical economic leverage.

The creation of a Defence Investment Agency signals structural reform.

Execution Risks

Ambition alone does not guarantee success.

Challenges include:

• Skilled labour shortages

• Procurement delays

• Industrial scaling capacity

• Export controls

• Political resistance to sustained 5% GDP spending

Canada’s ability to align procurement timelines with industrial readiness will determine the outcome.

A Turning Point for Canada’s Industrial Sovereignty

Sidhu framed the moment clearly:

“When Canada builds, Canada leads.”

The Defence Industrial Strategy positions Canada at a crossroads.

If effectively executed, it could reshape Canada’s defence ecosystem, strengthen economic resilience, and increase global influence.

If mismanaged, it risks becoming an expensive framework without operational transformation.

The next decade will define whether Canada converts industrial ambition into strategic capability.