{"id":24044,"date":"2026-01-16T22:23:50","date_gmt":"2026-01-16T22:23:50","guid":{"rendered":"https:\/\/www.rbc.com\/en\/?post_type=rbc_tl&p=24044\/government-analysis-tracking-climate-policy-intent-and-action"},"modified":"2026-01-30T19:08:40","modified_gmt":"2026-01-30T19:08:40","slug":"top-risks-2026-remilitarizing-the-maple","status":"publish","type":"rbc_tl","link":"https:\/\/www.rbc.com\/en\/thought-leadership\/the-growth-project\/top-risks-2026-remilitarizing-the-maple\/","title":{"rendered":"Top Risks 2026: Remilitarizing the Maple"},"content":{"rendered":"\n
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This is a part of RBC Thought Leadership and Eurasia Group’s joint report<\/a><\/em><\/p>\n\n\n\n

Canada is looking to build its military, develop an industrial base and forge new commercial partnerships at a wartime pace. A failure to execute could lead to others, notably the U.S., stepping in.<\/strong><\/p>\n\n\n\n

Canada\u2019s enthusiasm for rapid militarization began the moment Donald Trump demanded more from America\u2019s NATO allies and deepened as he mused about taking over parts of the Western Hemisphere, from Panama to Greenland, even putting the idea of Canada as the 51st state on the table. For Canadians, the exercise was initially a budgetary one, finding ways to allocate tens of billions to its small and often overlooked military. But when Trump sent the U.S. military into Venezuela, the warning for Canada and its armed forces took on a sharper focus. Borders are no longer gates. They\u2019re hard lines that need to be defended.<\/p>\n\n\n\n

For Canada, the task of building a big military\u2014the biggest since the Second World War\u2014is daunting. In war, extraordinary measures like state-run supply chains can be implemented quickly. In peacetime, each step needs more negotiation\u2014that\u2019s made even harder with a public that barely remembers the losses of the Afghan mission and a military bureaucracy that has struggled with much smaller magnitudes of procurement and deployment. The industrial base is a further challenge. Mention the words \u201cmilitary-industrial complex\u201d and most Canadians will say \u201cno, thanks.\u201d Before Trump returned to power, Canada ranked 27th out of 31 NATO nations when it came to military spending as a share of GDP. In fact, defence spending had languished for the past 25 years at levels well below the late 20th century averages. Military enrolment has also been in terminal decline, with less than two service members for every 1,000 people. Even peacekeeping has declined to a few dozen blue helmets.<\/p>\n\n\n\n

The Mark Carney government has taken the challenge head on. Its first budget injected $81.1 billion over five years. Now, Ottawa is trying to reduce the heavy concentration it spends in the United States, taking gunboat diplomacy in a very different direction: its ministers have travelled the world in search of equipment like submarines, and much more, from any ally other than the U.S. Relations with Japan and Germany have been transformed by the idea of peacetime rearmament. Same with South Korea and Sweden.<\/p>\n\n\n\n

But now comes the hard part: making choices. Ottawa will inevitably irk an ally, and may very well irk its own military brass, by choosing boats, planes and weapons that aren\u2019t as effective, on the battlefield or the balance sheet, as those American options. The challenge of \u201cinteroperability\u201d is even greater if the Canadian military is to continue to share responsibility with the U.S. for the defence of North America. Currently, 100% of Canada\u2019s fighter aircraft, 91% of helicopters, and more than 75% of other mission aircraft originate from the U.S. If the U.S. feels Canada\u2019s non-American equipment isn\u2019t up to the task of defending the Arctic or, for that matter, the North Atlantic, they may just do it themselves, even if it means torpedoing Canada\u2019s sovereignty.<\/p>\n\n\n\n

The vast web of red tape in Canada\u2019s defence procurement system\u2014and a bureaucracy trained to say \u201cmaybe\u201d\u2014has contributed to draining the private sector of much of its entrepreneurial flex. In recent budgets, fully a quarter of the Industrial and Technology Benefits Policy, or $15.3 billion, was listed as unallocated, <\/strong>due to deployment frictions, certification gates and poor definitions. Even the government admits it takes 15-plus years for a major fleet acquisition. And a recent study found that $18.5 billion in planned capital went unspent over a five-year period. A new \u2018Buy Canadian\u2019 military mandate may lead to, at least in the short term, more dollars chasing fewer producers. But greater cyber-security requirements\u2014and a lot of the new spend will go to cyber defence\u2014stands to cause further delays.<\/p>\n\n\n\n

To break through that bureaucratic blockade and boost military spending at home, the Carney team opened a new Defence Investment Agency to do something soldiers are trained to do on the battlefield but is less common in government: move fast. The new money hasn\u2019t even started to flow at speed or scale, and regions are insisting on their share, whether in the national interest or not. This will inevitably lead to lower efficiencies and higher costs, even if it does create more jobs for Canadians. It will also challenge Canada to be competitive in the growing global arms market, as it seeks to trade with allies in Europe and Asia\u2014but will need scale and excellence to meet their standards.<\/p>\n\n\n\n

Of course, missing in these equations is the sort of private capital that has helped the U.S. military-industrial complex grow. That new kind of military capitalism will be novel for many Canadian operators, and the military. Canada is seeking to play a leading role in the nascent Defence, Security and Resilience Bank\u2014a kind of World Bank for NATO and its allies\u2014which will draw on the strengths of members\u2019 balance sheets to help them borrow on capital markets to finance their own budgets and supply chains. The government\u2019s financial institutions, such as the Business Development Bank and Export Development Canada, will need to play an even greater role in helping small- and medium-sized Canadian businesses raise the capital needed to serve the so-called \u201cprimes\u201d\u2014or prime contractors\u2014that sit at the top of every supply chain.<\/p>\n\n\n\n

Canada\u2019s defence industrial base includes about 600 firms\u2014compared to 60,000 in the U.S.\u2014and most employ fewer than 250. Those small but mighty Canadian firms have an equally small capital base. Many have been lucky to survive through the demand shocks of various governments and militaries announcing programs and then delaying them, or even shutting them down. Adding to the challenge is the fact that half of Canada\u2019s military exports go to the U.S., which may decide to close the door if Canada snubs the big American primes. A more hidden risk for Canadian SMEs is entanglement. The IP in a complex defence product is often controlled by large operators, usually multinationals, that can shut down a small supplier.<\/p>\n\n\n\n

Generals, and their political masters, love their toys, which is why so many photo ops are with big hulks of steel and not small groups of men and women doing the work behind the machines. Still, more of those people will be needed\u2014but are harder to find. Canada\u2019s military employs only 0.38% of the national labour force\u2014down from 0.56% a decade ago, and well below Britain (0.58%), Australia (0.60%) and the U.S. (1.69%). The Canadian military, which has struggled to get close to 100,000 personnel, may need to double or triple in size in the next decade. And it\u2019s not just fighter pilots and combat soldiers. It\u2019s base operators in the Far North and cyber coders across the south. Currently, the Canadian Armed Forces (CAF) is roughly 15,000 members short of its intended size, creating persistent readiness and sustainment gaps. A lack of speed is to blame. Median recruiting timelines are upwards of 271 days, more than double the official target. The delays are sometimes greater for Canada\u2019s large immigrant population, which needs to undergo an even longer security clearance. It\u2019s no wonder more than half the young Canadians who apply ultimately pull out. And then there\u2019s the hurdle of training. The CAF\u2019s training centres are running at 80% capacity due to a shortage of instructors. That pressure may only grow as the military becomes more STEM-driven. The defence sector is 2.5 times as STEM intensive as general manufacturing.<\/p>\n\n\n\n

Remilitarization is central to Canada\u2019s effort to carve out a new relevance in the world, especially to allies, old and new. Even before Trump\u2019s second term began, Canada was significantly growing its military participation in eastern Europe in response to the Russian invasion of Ukraine. The Canadian deployment in Latvia is one of Canada\u2019s biggest peacetime missions anywhere and seen in Europe as a meaningful commitment to the continent\u2019s defence. A growing Canadian military may also play a role in defending the Caribbean from drug cartels, as well as unrest in places like Haiti. And, of course, it will define itself once again in the Arctic, on land, in the air, under the ice\u2014and overhead in low orbit, where the next battlefields may play out.<\/p>\n\n\n\n

A more sophisticated and better capitalized defence industry\u2014and a more dynamic armed forces\u2014may even help shape the next chapter of Canada-U.S. relations. As partners, not rivals, in taking on the greater threats of China, Russia and Iran. The Great White North\u2019s geographic sanctuary has long been a blessing. Any loss of that sanctuary will challenge the country anew. But for those Canadians who study their history, the role of conflict\u2014present and hidden\u2014has never been far from sight.<\/p>\n<\/div>\n<\/section>\n\n\n\n

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Download the Report<\/h3>\n\n\n\n
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Download<\/a><\/div>\n<\/div><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n\n\n\n
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Contributors to the RBC Thought Leadership and Eurasia Group’s joint report:  <\/strong><\/p>\n\n\n\n

Gerald M. Butts<\/strong>: Vice Chairman and Senior Advisor, Eurasia Group<\/p>\n\n\n\n

Graeme Thompson<\/strong>: Senior Analyst\/Global Macro, Eurasia Group<\/p>\n\n\n\n

John Stackhouse:<\/strong> Senior Vice President, RBC Thought Leadership, Office of the CEO<\/p>\n\n\n\n

John Intini<\/strong>: Senior Director, Editorial, RBC Thought Leadership<\/p>\n\n\n\n

Yadullah Hussain<\/strong>: Managing Editor, RBC Thought Leadership<\/p>\n\n\n\n

Jackie Pichette<\/strong>: Policy Lead, Skills and Higher Education, RBC Thought Leadership<\/p>\n\n\n\n

Shaz Merwat<\/strong>: Policy Lead, Energy, RBC Thought Leadership<\/p>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"

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