Prime Minister Mark Carney Launches Canada’s Defence Industrial Strategy

Yesterday, Prime Minister Mark Carney, joined by the Honourable David McGuinty, Minister of National Defence, and the Honourable Mélanie Joly, Minister of Industry, launched Canada’s first Defence Industrial Strategy, intended to strengthen security, create prosperity, and reinforce strategic autonomy by unlocking $180B in defence procurement, $290B in defence infrastructure, $125B in downstream economic activity.

This announcement comes at a time when Canada is focusing on building a One Canadian economy to increase sovereignty and security by fostering domestic supply chains in key industries and reducing reliance on the United States through strategic partnerships with allied nations.

Defence Industrial Strategy Overview

Canada’s Defence Industrial Strategy is structured around five key pillars to shape investments towards growing Canada’s defence industry capabilities:

1. Renewing Relationship with Industry

The federal government makes it clear that Canadian defence companies must be partners in building and sustaining the Canadian Armed Forces, emphasizing the need for a clear, long-term demand signal from the government for defence and dual-use goods. The government commits to ensuring early and regular mechanisms for industry to engage with the government through a permanent Defence Advisory Forum, the establishment of “industry days” with key departments, and investing to significantly accelerate the security clearance process for defence sector personnel.

2. Procuring Strategically Through a New “Build–Partner–Buy” Framework

The strategy establishes a new approach for the Defence Investment Agency, applying a “Build-Partner-Buy” framework that will focus first on building in Canada, particularly in areas of key sovereign capability or where Canada already has deep strengths, and partnering with allies to build together, or buy off-the-shelf, in ways that ensure Canadian sovereign control and flow benefits back to Canadian industry. The government will publish a framework to identify and onboard select Canadian defence firms as key strategic partners by summer 2026.

This approach will include making reforms to Canada’s Industrial and Technological Benefits (ITB) Policy, ensuring alignment with key sovereign capabilities, strengthening Canadian innovation and industrial capacity, supporting exports and deeper integration into allied supply chains, rewarding skills development through re-examining incentives, and simplifying administration to reduce uncertainty within the approvals process. ISED will publish changes to the ITB Policy in early 2026.

3. Investing Purposefully to Strengthen an Innovative Canadian Defence Sector

Within the strategy, the federal government commits to supporting R&D by establishing a new Science and Research Defence Advisory Council in 2026; protecting Canadian intellectual property through Elevate IP and other programs, including under the new Build-Partner-Buy Framework; and promoting exports in the defence sector through increasing financial support for export promotion efforts, and establishing a new whole-of-government strategy to boost Canadian defence exports.

The strategy also ensures support for small- and mid-sized businesses through the Defence Industry Assist stream of NRC–IRAP, the Regional Defence Investment Initiative, and the Defence Platform through BDC. In addition, the government will implement a Canada Defence Skills Agenda focusing on four key priorities to support the defence workforce: strengthening the defence industry talent pipeline; investing in urgent defence sector skills needs; growing the supply of skilled labour; and partnering with provinces, territories, and Indigenous rights holders.

4.  Securing Supply Chains for Key Inputs and Goods

The federal government highlights the need for establishing domestic supply chains to support the defence industry, from critical minerals to specialized components, to ensure operational readiness and national security. The strategy introduced the launch of investments in 2026 in the new Canadian Defence Industry Resilience (CDIR) program to help secure key supply chains for the Canadian Armed Forces, prioritize funding under the Strategic Response Fund and Life Sciences Fund to support key strategic sectors to participate in the strategy, and create a strategy to expand the production, processing, stockpiling, and procurement of defence-critical minerals by Q2 of 2026.

5. Working with Domestic Partners, including in Canada’s North and Arctic

As part of the Defence Industrial Strategy, the federal government commits to working closely with the provinces and territories, Indigenous communities, and other key stakeholders to ensure that defence infrastructure and industrial growth are inclusive, sustainable, and geographically balanced. This will include a particular focus on Canada’s North and the Arctic, with investments to support defence capabilities and create enduring benefits, reflecting a whole-of-government approach that integrates sovereignty, security, and prosperity in Canada’s Arctic and northern regions.

Analysis

With an allocation of $6.6 billion in funding from the previously announced $81.8 billion in Budget 2025, the Defence Industrial Strategy aims to strengthen the Canadian Armed Forces, advance Canadian sovereignty, and build up the Canadian economy by providing secure, reliable and timely capabilities to the Canadian Armed Forces, allies and partners, and investing in Canada’s defence industry. This is expected to result in an increase of more than 240 per cent in total Canadian defence industry revenues and the creation of 125,000 high-quality new jobs across the Canadian economy over the next 10 years.

While the Defence Industrial Strategy demonstrates the federal government’s continued priority in promoting domestic capabilities amid ongoing trade and geopolitical uncertainties,  the exact framework for how the federal government, through the Defence Investment Agency, will facilitate increasing the share of defence acquisitions awarded to Canadian firms to 70 per cent has yet to be defined, or if and how dual-use infrastructure technology will be prioritized.

Sussex will be diligent in how the Defence Industrial Strategy continues to be developed and what it will mean for key stakeholders in the sector and those engaging in dual-use infrastructure.