The Looming Tariff Shock

How Trump’s Tariffs Could Hammer the Canadian Defense Industry

The flags of Canada and the United States fly outside a hotel in downtown Ottawa on Feb. 1, 2025. The Canadian Press/Justin Tang

Commentary

If Donald Trump’s new tariffs go into effect next month, the Canadian defense industry will be among the hardest-hit casualties. While these tariffs are ostensibly aimed at countering unfair trade practices and bolstering American industry, their unintended consequences will reverberate across North America’s deeply integrated defense industrial base. The effects will be disproportionately severe on Canada, jeopardizing its defense sector, its ability to meet NATO obligations, and its already fragile relationship with Washington on security matters. Far from strengthening the U.S. defense industry, these tariffs threaten to weaken North America’s collective defense capabilities and undermine efforts to secure the Arctic, North Atlantic, and North Pacific.

Canada’s Defense Industry Is Not Just ‘Foreign’—It’s a US Partner

Canada’s defense sector is not some distant, adversarial entity; it is an integral part of the North American defense industrial ecosystem. Many Canadian defense firms are deeply embedded in U.S. supply chains, manufacturing critical components for American platforms, including fighter jets, naval vessels, and munitions. The Defense Production Sharing Agreement (DPSA), in place since 1956, was specifically designed to ensure a seamless defense production relationship between the two countries.