Canada Just Told Washington: You're Not a Trusted Ally!

追加: 2026-05-12

[00:00:00]Algoma Steel has signed a binding memorandum of understanding with South Korean shipbuilder Hanwha Ocean to the tune of $345 million. Both South Korea [music] says it too can move manufacturing to Canada if the government insists. Next week, the Prime Minister will get to see Hanwha's shipyard [music] up close.

[00:00:20]>> South Korea has set its sights on becoming one of the world's top defense industry powers and the Canadian submarine [music] procurement program is a key milestone in that journey.

[00:00:31]In Ottawa last week, the man in charge of evaluating Canada's $20 billion submarine contract was asked twice on the record whether the United States is still a trusted ally. He didn't say yes.

[00:00:46]He said, "That's a question of opinion."

[00:00:49]He added that when it comes to trade matters, Washington can be unreliable.

[00:00:54]That official is Doug Guzman, CEO of Canada's new defense investment agency, the agency designing the next 20 years of Canadian military procurement.

[00:01:05]And his answer, delivered to the House of Commons Defense Committee, is one of the things a Canadian procurement official has said about the United States in living memory.

[00:01:15]It also happens to be the quietest part of a much louder story because 3 weeks before that exchange, Prime Minister Mark Carney launched Canada's first-ever defense industrial strategy, a formal national policy aimed at reducing Canada's dependence on American weapons.

[00:01:35]And 9 days after that, South Korea's Hanwha Ocean signed a memorandum of understanding to invest up to $345 million Canadian into a steel plant in Sault Ste. Marie, Ontario. These aren't three separate stories. They're one story and it has almost nothing to do with submarines. If you're new to the 49th report, this is what we do. Cross-border stories where the headline isn't the real story. If that's what you came for, hit subscribe.

[00:02:07]Now, let's get into it.

[00:02:08]For decades, the math of Canadian defense procurement was simple. Canada needed weapons. The United States made the best weapons. So, Canada bought from the United States. Prime Minister Mark Carney has now said publicly in several speeches that this arrangement meant 75% of every federal dollar Canada spent on military purchases went to the Americans. That number was treated as normal until it wasn't. In February 2026, Carney's government formally released a document that rewrote the entire framework, the defense industrial strategy.

[00:02:47]It runs more than 50 pages, but the core of it can be summarized in one number.

[00:02:53]Within 10 years, Canada wants 70% of its defense contracts going to Canadian firms, up from 43% today.

[00:03:02]Canada is not making a small adjustment.

[00:03:05]Canada is announcing that within a decade, the share of its defense dollars going abroad, mostly to the United States, will be cut nearly in half. In a background briefing, senior defense officials confirmed the current baseline. 43% of federal defense contracts are awarded to Canadian firms today. The strategy explicitly sets out to bring that to 70%.

[00:03:29]The document positions Canadian industry to take advantage of 180 billion dollars in defense procurement opportunities and 290 billion dollars in defense-related capital investment opportunities in Canada over the next 10 years. In total, the defense industrial strategy represents an investment of over half a trillion dollars in what Carney's office calls Canadian security, economic prosperity, and sovereignty.

[00:03:58]The phrase that keeps appearing in official documents is strategic autonomy. That is a polite technocratic way of saying we no longer assume the United States will be there.

[00:04:11]And that's where the submarine contract comes in.

[00:04:14]Canada's Royal Canadian Navy needs to replace its aging Victoria-class fleet.

[00:04:19]Of the four submarines Canada currently owns, only one is operational. The Canadian Patrol Submarine Project is the program to replace them. Up to 12 new conventional diesel-electric submarines.

[00:04:32]Total program value more than $20 billion. Lifetime value including 30 years of maintenance and support runs much higher. The original procurement was a normal defense acquisition. Two bidders survived a down-select from four. Hanwha Ocean of South Korea offering a submarine called the KSS-III Batch II.

[00:04:54]And ThyssenKrupp Marine Systems of Germany offering the 212CD, a German-Norwegian joint design.

[00:05:02]Both companies submitted formal proposals in early March 2026, and then something unusual happened. The government of Canada extended the bidding deadline.

[00:05:12]Not because the proposals were technically weak, because in the words of one defense procurement source, Ottawa was not satisfied with the economic and industrial benefits promised in the initial bids. In plain English, Canada told two of the world's largest defense companies that their submarines were fine, but the deal attached to those submarines wasn't big enough. Both companies came back with revised offers, and that is when the contract stopped being about submarines.

[00:05:42]In late April 2026, Hanwha announced a memorandum of understanding with Canada's Automotive Parts Manufacturers Association, known as APMA. The promise was specific. If Hanwha wins the submarine contract, it will build a suite of military vehicles inside Canada. The list includes K9 Thunder self-propelled howitzers, Redback infantry fighting vehicles, Chunmoo multiple launch rocket systems, and remotely operated ground drones. The proposed joint venture would be majority Canadian owned with a Canadian CEO and would use Canadian workers, parts, and materials including steel and aluminum.

[00:06:26]Industry Minister Mélanie Joly was quoted as having been publicly in favor of retooling Canadian auto plants idle by the trade war with the US to build military-grade vehicles. End quote. Stop on that sentence for a moment. The Canadian government is openly proposing to take auto plants that the trade war with the United States has shut down and convert them into factories that build Korean designed howitzers. Plants that until recently were exporting cars and components into American supply chains.

[00:06:59]The same plants whose workers lost their jobs because Washington imposed tariffs.

[00:07:06]Those workers, those plants could be retooled to manufacture weapon systems for a partnership that explicitly bypasses the United States. That is not a defense deal. That is an industrial countermove.

[00:07:22]And it doesn't stop with armored vehicles. In January, Hanwha signed a separate memorandum of understanding with Algoma Steel in Sault Ste. Marie.

[00:07:32]Under the agreement, Hanwha would provide Algoma up to 250 million US dollars, approximately 345 million Canadian dollars, to develop a new structural steel beam mill. The plant would supply steel for submarine construction and also for infrastructure and housing projects in a market that has historically been dominated by imports.

[00:07:57]In April, Hanwha signed another memorandum of understanding with Atkins Réalis, the Montreal-based engineering firm that stewards CANDU nuclear technology to collaborate on long-term submarine infrastructure. Additional MOUs followed with Telesat, MDA Space, Cohear, Mohawk College, PV Labs, and Babcock Canada.

[00:08:21]Each one weaves another Canadian firm or institution into the deal.

[00:08:26]By Hanwha's own analysis conducted with KPMG, the industrial cooperation tied to the submarine project could support approximately 200,000 job years over a 15-year period from 2026 to 2040.

[00:08:43]That is roughly 15,000 jobs annually.

[00:08:47]The company's Canadian CEO, Glenn Copeland, has publicly claimed the figure could reach 25,000 jobs a year when broader investment is included with an additional 15,000 short-term jobs from constructing submarine maintenance facilities in Halifax and Esquimalt, British Columbia.

[00:09:07]These are large numbers. They should be treated with the appropriate skepticism that comes with any pre-contract economic projection, but the underlying signal is clear. Hanwha is not selling Canada a submarine.

[00:09:21]Hanwha is offering to plug itself into Canada's industrial base.

[00:09:26]And the German bid is doing the same thing. TKMS has signed partnerships with Bombardier, with the Hamilton-based Ontario shipyards, with Seaspan on the West Coast and with multiple Canadian sustainment firms. Both bidders have grasped the same point.

[00:09:43]The government of Canada is not buying submarines. The government of Canada is buying domestic industrial capacity and whoever offers more of it wins.

[00:09:54]According to reporting from The Globe and Mail in March, there is also a quieter possibility under consideration, splitting the contract. TKMS for the Atlantic coast, Hanwha for the Pacific coast.

[00:10:08]The Defense Investment Agency CEO asked at committee whether a mixed fleet was on the table, said any such decision would be led by the Royal Canadian Navy.

[00:10:17]He did not deny the report.

[00:10:19]Whatever the final outcome, the message to American defense contractors is the same. They were not invited to this competition. They are not part of these conversations. They are watching from the outside.

[00:10:32]Now, none of this is happening in a vacuum.

[00:10:35]Several days before the defense industrial strategy was released, President Donald Trump signed an executive order establishing what he called the America First Arms Transfer Strategy. The intent, in his administration's framing, is similar to Canada's.

[00:10:52]Strengthen American arms manufacturing for weapons most operationally relevant to American forces and support domestic In other words, the United States is also pulling back. Canada and the United States, two countries whose defense industries have been deeply integrated for 75 years, are now both publicly committed to building more of their own equipment at home with each other.

[00:11:18]And that is the story underneath the submarine deal.

[00:11:22]There is a real critique of all this.

[00:11:24]The Globe and Mail editorial board has argued that Canada's new strategy risks becoming what they call a fortress mentality. Buying Canadian by policy, even when the best equipment is foreign made.

[00:11:38]The same Mark Carney who built his global reputation warning against economic fragmentation is now presiding over a document that his critics argue embraces it. That criticism is not unreasonable. Industrial self-sufficiency in defense is expensive. It can mean buying equipment that is more costly or less capable than what's available on the open market.

[00:12:02]There are real economic costs to strategic autonomy and those costs will eventually show up in Canadian budgets and Canadian taxpayer bills.

[00:12:12]But the Carney government's bet is straightforward. Whatever it costs to depend less on the United States is worth it.

[00:12:20]Because the cost of continuing to depend in a world where American policy can change unpredictably between elections is higher.

[00:12:28]That bet has been made openly in speeches, in a 50-page strategy document, in a half-trillion-dollar investment plan, in a submarine procurement explicitly designed to reward foreign companies that promise to build inside Canada, and in an Ottawa committee room where the man in charge of running that procurement was asked if the United States is a trusted ally and didn't say yes. The submarine decision is expected by the end of June. Whichever way it lands, it will not be the last decision of this kind. Canada has set a 10-year target.

[00:13:06]It has launched a brand-new agency to enforce it. It has tied half a trillion dollars to it. Three weeks ago, this story was framed in headlines as a big foreign investment deal, the Korea deal, the submarine deal, the auto plants deal. They are all part of one larger and quieter story.

[00:13:27]Canada is formally, in writing, in budget, in procurement, becoming less American.

[00:13:34]If you want the next breakdown of what's happening between Ottawa, Seoul, Berlin, and Washington, subscribe. The 49th Report, truth delivered daily.