Canada's ambitious plan to modernize its military is creating a "gold rush" for defense technology companies, particularly those within the country. With the government committed to reaching NATO's defense spending target of 2% of GDP by the end of March 2026, and further increasing to 3.5% by 2035, billions of dollars are being poured into upgrading equipment and capabilities. This commitment translates to roughly $63 billion.
The Liberal government is aiming to leverage this investment to stimulate Canada's domestic defense industry. The focus is on procuring more military capabilities from Canadian supply chains through a Defence Industrial Strategy, backed by $6.6 billion over five years, starting in 2025-26. This strategy aims to reduce the country's reliance on foreign suppliers, especially the United States. Minister Stephen Fuhr, Secretary of State (Defence Procurement), has emphasized the potential for defense investments to bring back much-needed manufacturing jobs to Canada.
Several Canadian companies are poised to benefit from this surge in defense spending. CAE, a global leader in simulation and training solutions, reported a strong backlog in its defense segment. Bombardier, while known for its business jets, also has a defense unit with a multi-year contract to supply aircraft to the U. S. Air Force. MDA Space is responsible for Canada's first military satellite. Kraken Robotics, specializing in underwater robotics, is expanding its production to meet the increasing demand for unmanned underwater vehicles. The submarine project proposals are due in March, and will act as a major test for Canada’s new Defence Investment Agency.
However, challenges remain. Canada's defense procurement system has been criticized for being slow and bureaucratic. The newly formed Defence Investment Agency, run by former banker Doug Guzman, is tasked with streamlining the process and centralizing decision-making. Meeting NATO's spending targets will also significantly increase the federal deficit, posing a financial challenge for the government.
