6.4.26
Dear Partners in Thought,
As there is expectedly a news flood about the ill-fated and poorly managed Iran war, I wanted to review a major but rather uncovered feature related to the changing geopolitical world gradually unfolding as the result of the Trump 2.0 unusual and erratic geostrategic policies. As such, I decided to focus on Canada, a country that was never a key geopolitical actor due to its North American location and powerful free world leader neighbour and security partner.
The relations between America and Canada have become less than friendly since the beginning of Trump 2.0 and his aggressive tariff offensives on the world and its closest Western allies. While many of the less enlightened ones within the MAGA base may have enjoyed Trump’s tough rhetoric about the 51st state to be, Ottawa, especially under Mark Carney, took the view that it was time for more strategic independence and operational autonomy, especially in defence, as did all European NATO allies. One can still wonder what would drive Trump to make such aggressive statements, but the erratic and ill-thought-out Iran war made those almost irrelevant. It is clear, however, that both Canada as well as Europe (Britain and the EU) decided that it was ample time to be more autonomous and independent from the US, especially in terms of defence, while still ensuring that NATO perdures in its challenging times.
Given its proximity to the US, Canada naturally relied historically on its powerful neighbour for its defence. Many did not even realise that Canada was part of NATO, often and justifiably perceived as a defence organisation focused on Europe with Russia as its main potential foe. (Canada has indeed forces in Latvia.) While many European NATO members were driven to reach a 5% GDP target committed to defence as the US justifiably felt their commitment, a fortiori for the defence of Europe, was not enough, Canada, at 1.45% in 2024, was still well below the formally required 2%. This changed under Mark Carney when it finally achieved the 2% goal in 2025, five years ahead of schedule given the challenging times we know. Over 2025-26, CAD 63 billion were committed to the various features of Canada’s defence forces. This investment drive in key military assets, building its industry and dual-use investing are putting Canada on track to meet the new 5% GDP investment by 2035, its biggest military build-up since WW2. Its defence industry provides CAD10 billion to its GDP while supporting 80,000 jobs with expected strong sector growth. Canada will now rebuild, rearm and reinvest in its armed forces in a move to assert its own independence, also as a reliable Western partner. Over the next decade, Canada will commit CAD 500 billion in defence investments via different programmes and investment vehicles.
It should be clear to all that Mark Carney, who used to be Governor of the Bank of England from 2013 to 2020 and Canadian Prime Minister since 2025, is the man his country needed and, in many ways, the Canadian de Gaulle of our times. His English and Canadian leadership also lends him to be the ideal leader to strengthen his country’s commitment to defence and partnership with Europe to allow the West to be stronger while making sure NATO could go on despite erratic US withdrawal threats. Mark Carney saw the need to focus on defence and increase his country’s commitment, which will lead to massive investments from both the public and private sectors, also internationally. Canadian defence sector projects covering multi-billion dollars will be developed over the next few years via different instruments, including investment funds that will also attract international investors. Many institutional investors are now ready to commit to a segment that once was sensitive in nature but is now a key investment sector where tangible returns will also be seen, both strategically and financially with positive impacts across Western economies and societies.
Many Canadian “defence” companies benefitted from the drastic geostrategic change. Infrastructure giant Atkins Réalis’s share price more than doubled while MDA Space’s more than tripled since 2024. Local companies were to receive 70% of the nation’s military spending, boosting their revenues by more than CAD 3.7 billion a year while creating opportunities for many SMEs. One of Ottawa’s goals will be to bring many suppliers into an end-system integrator like those of Lockheed, Northrop or BAE. In March, Mark Carney announced funding for three “forward operating bases” and other upgrades for the country’s Arctic zone (40% of Canadian land mass with only 150,000 people). Such policy change will have an impact on Canada’s budget deficit that is deemed acceptable given the primary need for security, strength and independence.
When at Davos last January, Mark Carney’s speech heralded new times in stressing “the rupture of the rules-based international order” caused by the new US leadership and the need for middle powers to unite. As such, one of the expected Canadian responses to Trump 2.0’s odd statements and policies was to start shifting away from US arms manufacturers, then representing 80% of Canadian arms procurement funding, many of which focused on fighter jet purchases (also an issue that European countries would like to follow even if challenging given decades of comfortable habits). In February, Carney also stated Canada’s plan to develop “a new, ambitious and comprehensive security partnership with the UK and the EU” as well securing collaborations with partners in Asia-Pacific. This strong declaration came after agreements to increase security cooperation already signed with the UK and the EU in June and May 2025 that reflected an increased unease with the declining US relationship (In May 2025, the UK signed a similar agreement with the EU as the first post-Brexit actual rapprochement).
This new defence drive will ensure that Canada’s Northern/Arctic hemisphere and proximity to strategically sensitive Greenland are better protected while its military autonomy and independence as well as NATO membership are strengthened. Such a transformational move will also provide unique opportunities for workers, businesses and institutional investors at home and abroad. In some ways, Canada and the West should thank a sadly game-changing Trump 2.0 for creating an opportunity to be stronger and more independent, this even if NATO should remain a much-needed Western alliance and one of the most historically successful defence pacts globally (A latter point that the US mid-terms may also start helping with meaningfully.)
Warmest regards,
Serge
Desperate Measures 