Canada has finally hit the NATO 2% of GDP defence spending benchmark in fiscal 2025–26, with total expenditures exceeding $63 billion across the Department of National Defence, Canadian Armed Forces, and other government departments. This marks a historic milestone.
But the numbers tell only half the story. Behind the spending surge is a quieter, more profound shift: Canada is deliberately diversifying its defence procurement away from long-standing U.S. dominance toward European suppliers and domestic industry. Under Prime Minister Mark Carney, Ottawa has embraced a “build, partner, buy” industrial strategy and joined the European Union’s landmark Security Action for Europe (SAFE) program — the first non-EU country to do so.
The End of “70 Cents on the Dollar”
For decades, roughly 70 cents of every defence capital dollar spent by Canada flowed south of the border. That era is ending. Carney has explicitly stated that no more will over 70% of military capital spending go to U.S. suppliers. Instead, the new policy prioritizes:
- Build — Canadian firms first (target: significantly increase domestic content in federal defence contracts).
- Partner — Joint projects with allies (especially Europe, UK, Australia, France) that bring investment and IP to Canada.
- Buy — Foreign purchases only as a last resort.
The centrepiece of this pivot is Canada’s entry into the EU’s SAFE initiative — a €150 billion ($170 billion) low-interest loan program designed to supercharge European rearmament. Canadian defence companies can now partner directly with EU firms on joint bids, access favourable financing, and expand markets while drawing European investment home.
Carney framed the move bluntly: “Canada’s participation in SAFE will fill key capability gaps, expand markets for Canadian suppliers, and attract European defence investment into Canada.”
Concrete Signs of the Shift
- Fighter Jets: The F-35 purchase is under review. Sweden’s Saab has pitched local assembly and maintenance of the Gripen — a move that would keep jobs and sovereignty in Canada rather than shipping billions to Lockheed Martin in the U.S.
- Submarines: Canada’s future fleet competition has narrowed to European (German/Norwegian TKMS) and South Korean (Hanwha) options, with strong emphasis on industrial benefits and technology transfer to Canada.
- Industrial Base: Billions are flowing into the Defence Industrial Strategy, supporting projects like River-Class Destroyers, Cormorant upgrades, search-and-rescue aircraft, logistics vehicles, and Arctic capabilities. These are explicitly designed to create Canadian jobs and reduce foreign dependence.
Even NORAD modernization — the $32 billion Arctic plan — is now framed as moving Canada “from reliance to resilience” on the United States.
Why Now? Geopolitics, Economics, and Realism
Two drivers are colliding. First, pressure from the Trump administration on allies to spend more — combined with trade tensions — created political space for diversification. Second, the Russian threat has accelerated European rearmament, and Ottawa sees an opportunity to ride that wave rather than remain an outlier.
NATO Secretary-General Mark Rutte captured the mood: “For too long, European allies and Canada were overly reliant on U.S. military might. But there has been a real shift in mindset.”
The Risks and the Reality Check
This pivot is not without risk. Interoperability with U.S. forces remains essential for NORAD and integrated operations. European or other equipment can be excellent (Gripen’s operational availability and cost-effectiveness are well-documented), but switching platforms carries transition costs and training burdens. Supply chains must prove resilient, and Canada’s historically low readiness rates mean money alone won’t fix capability gaps overnight.
Moreover, while “partnering” with Europe sounds harmonious, Canada must walk a fine line: complementary to Washington, not competitive.
Sovereignty Through Diversification?
Canada is no longer content to be the alliance’s perennial under-spender and over-buyer from one supplier. Hitting 2% — and charting a course toward higher targets — while deliberately reorienting procurement is a declaration of strategic adulthood. It strengthens the domestic industrial base, creates jobs, bolsters Arctic sovereignty, and reduces single-point vulnerability to U.S. policy swings.
Whether this pivot delivers real capability faster than the old model remains the critical test. The spending is there. The contracts are shifting. The question for Canadians is the same one The Sentinel has asked before: Will the money finally translate into ready, sovereign forces — or will we simply trade one form of dependence for another?
The next few years of procurement decisions will tell us whether this is a genuine rearmament for the 21st century or just another well-funded aspiration.
What do you think — is Canada’s European pivot smart statecraft or risky fragmentation? Drop your thoughts on X @jonathanwadeca.