Canada's defense sector booms as Ottawa pivots away from US suppliers
Canada's defense industry is expanding rapidly as the government boosts spending and seeks to reduce reliance on US military suppliers.
Inside a Toronto garment factory, workers are stitching helmet covers for the Canadian Armed Forces. The scene is a small but visible sign of a much larger shift: Canada is aggressively building up its domestic defense industry as relations with the United States fray.
The factory, run by luxury parka maker Wuxly, is one of a growing number of Canadian companies entering the defense sector. The government's new strategy, unveiled by Prime Minister Mark Carney, aims to strengthen economic self-sufficiency and reduce dependence on American military hardware. This push comes amid escalating trade tensions with Washington and pressure from US President Donald Trump for Canada to increase its NATO contributions.
Ottawa has earmarked an additional $60 billion for defense over the next five years, on top of its current annual spending of roughly $36 billion to $43 billion. The broader strategy envisions investments exceeding half a trillion dollars over a decade, with the goal of creating 125,000 jobs and tripling the size of the domestic defense industry. Key priorities include aerospace, robotics, and unmanned systems.
"The scale of investment is quite significant by Canadian standards, certainly in peacetime," said Philippe Lagassé, a defense policy expert at Carleton University. The boom is evident across the industry, with defense shows sold out and new companies entering the field, according to Wuxly founder James Yurichuk. His company, which specializes in female military uniforms, has also supplied 40,000 uniforms to Ukraine's military.
A major focus is the Arctic, where Canada seeks to assert sovereignty over a vast, sparsely populated, and increasingly contested region. "We've got to clothe our soldiers properly," Yurichuk said, noting the need for innovation in the North.
Canadian startups are also positioning themselves for the opportunity. New Frontier Robotics, a two-person company based at the University of Waterloo, is developing an AI-powered mobile manipulator robot with potential military and civilian applications. Co-founder Nikhil Malhotra sees the potential for robots to handle dangerous maintenance tasks in Arctic environments. "Are you really willing to risk an operator's life? The answer is no," he said.
Volatus Aerospace, a drone maker near Montreal, is another company expanding into defense. Its technology is dual-use, serving civilian markets like medical supply delivery to remote communities, as well as military needs. The company's drones can carry heavy payloads, operate autonomously, and even be configured for kamikaze missions.
Canada has also signaled its intent to diversify its supplier base, awarding contracts this year to Sweden's Saab for radar planes and Germany's ThyssenKrupp for submarines, both over American competitors.
Despite the momentum, challenges remain. Opposition parties could target the spending plans in future elections, and Canadian companies may struggle to compete with US firms that have far larger research and development budgets. There is also a risk that innovative startups could be lured south by the much bigger American defense market. Still, for many, the new strategy represents a generational shift for a country long content to remain in the shadow of its southern neighbor on defense matters.