Trade Talks Break Down
Negotiations between Canada and the United States collapsed on Friday, just hours before President Donald Trump’s latest round of tariffs – a 50 per cent levy on US$20 billion of Canadian exports – took effect. A tentative agreement had been reached days earlier, but Prime Minister Mark Carney withdrew at the last minute, saying the US had altered its terms. In response, Ottawa is preparing to impose “dollar‑for‑dollar” counter‑tariffs beginning 8 September, a move the Trump administration warned could trigger further escalation. US Transportation Secretary Sean Duffy dismissed Canada’s chances on Fox News, calling it “foolish” to believe it could win a trade war with Mr. Trump and incorrectly asserting that Canada lacks a military.
Defence Procurement Under Review
The breakdown has shone a spotlight on Canada’s defence purchases, particularly the planned acquisition of 88 F‑35 fighter jets from Lockheed Martin. Shortly after assuming office in March 2025, Mr. Carney ordered a review of the deal. That review remains underway, and the order has stalled at a legal commitment to buy only 16 jets. Former Conservative leader Erin O’Toole, a member of the Advisory Committee on Canada–U.S. Economic Relations, told The Globe and Mail that the level of aggression shown against Canada “cannot just be sloughed off. It has to be responded to,” adding that Ottawa may need to reconsider major procurements such as fighter jets. He stressed that while Canada seeks to keep the trade dispute separate from military cooperation, the politics surrounding the F‑35 deal are increasingly entangled.
Saab’s Gripen Pitch
Amid the uncertainty, Saab is positioning its Gripen jet as a viable alternative. At the centenary celebrations of the Swedish Air Force held at Malmen Airbase outside Linköping, thousands of visitors and delegations from 37 allied air forces watched the F‑35 and Gripen displayed side by side. Saab president and chief executive Micael Johansson said he learned of the collapsed trade talks that morning but did not push Canada toward an either‑or decision. “I don’t think Canada will give up F‑35 completely. They will, of course, go forward with that to some extent. I have no clue how many,” he told The Globe and Mail. Former NORAD deputy commander Christopher Coates warned that letting trade frictions affect procurement would jeopardise North American defence, insisting the F‑35 remains the best option for Canada and NORAD alike.
Strategic Implications
Analysts argue that the US‑Canada relationship hinges on different pillars: economics for Canada, defence and security for the United States. Raquel Garbers, former director‑general at the Department of National Defence and a senior fellow at the Macdonald‑Laurier Institute, cautioned that if Washington views Canada’s procurement choices as politically motivated and a threat to its own security, the economic fallout for Canada could deepen. She urged Ottawa to manage the relationship constructively while leveraging it to develop niche capabilities. Eliot Pence, CEO of Ottawa‑based Dominion Dynamics and also on the Advisory Committee, echoed that view, stating Canada could create its own leverage by investing in domestic defence industries.
Why it Matters
The suspension of the F‑35 programme and the looming counter‑tariffs signal a broader shift in how Canada balances trade disputes with strategic defence needs. A prolonged standoff could delay critical upgrades to the country’s air force, affect joint NORAD operations, and push Ottawa toward diversifying its supplier base – potentially benefitting European manufacturers like Saab. At the same time, the unfolding tariff war threatens to disrupt supply chains across sectors from automobiles to agriculture, raising costs for businesses and consumers. How Canada navigates this crossroads will shape not only its defence readiness but also its economic resilience in an increasingly protectionist North American landscape.
