It looks like you're new here. If you want to get involved, click one of these buttons!
The Canadian government, faced with increasing hostility from the Trump administration, plans to divert billions of dollars in military spending it long gave to U.S. defense companies and direct it instead to domestic manufacturers. Prime Minister Mark Carney’s wholesale expansion of Canadian military spending was prompted by pressure from President Trump, but with relations between the longstanding allies deteriorating, American companies will no longer reap the benefit.
The new defense industry strategy, which is to be announced this week, is the latest step by Mr. Carney to distance his country from the United States following Mr. Trump’s decision to impose tariffs against several key Canadian industries. At the World Economic Forum in Davos, Switzerland, Mr. Carney said that there has been a permanent “rupture” in the world order. He called upon middle-size nations to cooperate as a counter to the world’s superpowers.
Like Canada, European nations have begun to question the reliability of the United States as an ally, given the Trump administration’s threats against Greenland. After becoming prime minister just under a year ago, Mr. Carney promised to raise Canada’s military spending to levels not seen since the Korean War. Last June, he poured 9.3 billion Canadian dollars — about $7 billion — into Canada’s military to meet NATO’s minimum spending level of 2 percent of gross domestic product. Canada has agreed to raise its military spending to NATO’s new target of 5 percent of gross domestic product by 2035.
But Mr. Carney has emphasized that Canada will no longer acquire 70 to 75 percent of its weapons from the United States, as has been historically the case. The two nations’ armed forces are closely entwined and NORAD, the North American air defense system, is led jointly by American and Canadian commanders. The government now plans to increase the revenues of Canadian military suppliers by 240 percent by directing 70 percent of military spending to domestic companies and increasing arms exports from Canada by 50 percent, and predicts that its domestic purchasing plan will create 125,000 additional jobs in the sector over the next decade.
Canada is also reviewing, for the second time, its decision to buy up to 88 F35 fighter jets from the United States. Currently Canada is only committed to purchasing 16 of the planes, which have been criticized by some as too costly and not well suited to Canada’s needs. Mélanie Joly, the industry minister, has criticized the limited level of Canadian manufacturing created by the F35 purchase. The government, she said last year, may ultimately buy a smaller number of F35s along with a fleet of Gripen E fighters made by Saab. The Swedish aircraft maker has partnered with Bombardier, the Montreal-based jet manufacturer, to eventually build the Gripen in Canada if the plane is chosen.
Canada is also shopping for about 12 new submarines, though American shipyards do not manufacture the diesel electric subs it wants. Hanwha Ocean, a South Korean company, and ThyssenKrupp Marine Systems of Germany are both promising substantial industrial benefits for Canada if they win that contract. In Hanwha’s case, those benefits go beyond military spending. In Ottawa last month to promote Hanwha’s ship, a delegation of South Korean officials signed an agreement to explore bringing Korean automotive manufacturing to Canada.
Hanwha has also agreed to spend $250 million to build a structural steel beam mill at Canada’s only domestically owned steel maker and to buy products from it. Algoma Steel, the company, has laid off workers since Mr. Trump imposed a tariff that now sits at 50 percent on Canadian steel.
A senior fellow at the University of Ottawa’s graduate school of public and international affairs said the new defense strategy was overdue: “Canada has not invested adequately in our defense industries, as we perceived ourselves to be protected by our U.S. neighbor,” she said. “That has clearly changed.”
© 2015 Mutual Fund Observer. All rights reserved.
© 2015 Mutual Fund Observer. All rights reserved. Powered by Vanilla
Comments
We should expect much bluster, false bravado and threats to be forthcoming.
Time to keep an eye on U.S. defense contractors, like RTX, NOC, LMT and the like.
If everybody who can, increases NATO spending to 5%, will that make the U.S. far less relevant in the world order? Is this a "careful what you wish for" moment? Should we expect a lot of that defense spending to go elsewhere?
"...directing 70 percent of military spending to domestic companies and increasing arms exports from Canada by 50 percent, and predicts that its domestic purchasing plan will create 125,000 additional jobs in the sector over the next decade."
That is a significant middle finger, right there. Making Canada Great Again! Probably only the beginning of what may be an irreversible trend. And not just with Canada.
Starting to look like a coordinated effort.
"With the war (Ukraine) about to enter its fifth year and Moscow viewed as an increasing threat by its European neighbours, leaders from the continent declared they would accelerate efforts to boost their own defences and rely less on the U.S." Not a fan of their previous work?
"Canada is also reviewing, for the second time, its decision to buy up to 88 F35 fighter jets from the United States. Currently Canada is only committed to purchasing 16 of the planes, which have been criticized by some as too costly and not well suited to Canada’s needs." - This is a painful move, given all the F35 cost overruns. That is 72 less $100 million airplanes.
That sounds like a forward thinking plan - EU defense ETF. Good idea.
We bought these defense ETFs - EUAD (Select STOXX Europe Aerospace & Defense), SHLD (Global X Defense Tech), and IDEF (iShares Defense Industrials Act), by selling US tech stocks.
Thus far this year, VGK (VG Europe ETF) and VEA (VG Developed Market) have out-performed S&P500, 6.1%, 10.1%, vs 0.4%, respectively. So much for the American Exceptionalism.
I guess our "exceptionalism" was heavily based on not being jerks.
Like, no shiat, right? It seems like common sense that when you enrage your customers they stop frequenting your establishment. It takes a ridiculous amount of hubris to entertain the notion that the 95% of the world have no choice in the matter.
There is a solid reason that Barney Fife was only allowed one bullet, and forced to keep it in his pocket. Who gave the orange dude the full arsenal?