Defence bonanza will reshape the global economy
NATO members raise military spending target to 3.5% of GDP, plus extra 1.5% for security-related items
🎯 Three-Shot Burst
Can Canada hit a moving target — and do we want to?
Days after Canada finally bumped its military spending to 2% of GDP — an increase that itself represents a 17% in-year jump for Canada’s defence budget — NATO allies have collectively agreed to raise that target to 5% of GDP by 2035. Hitting the 5% target will cost Canada $150B a year.
High five: As part of the new 5% pledge, each country agreed this week during the NATO Summit in The Hague to spend 3% of GDP for core military capabilities, and an additional 1.5% on investments in critical defence and security-related infrastructure. PM Carney says some of the latter envelope will count extracting, processing and exporting Canada’s critical minerals in partnerships with allies.
Open for business: Simultaneously, Canada’s energy and natural resources minister is calling for a wartime effort to build big national infrastructure projects as envisioned by recently passed bill C-5.
A will, but no way?: Financial roadblocks are forcing the UK’s military tech pioneers to risk insolvency, just as demand for advanced defence rises. Many banks continue to blacklist the defence industry. The problem is not unknown in Canada.
Bottom line: The NATO defence spending bonanza will reshape the global economy.
In Canada, the days of dithering, red tape, and outsourcing Canadian security appear to be over. Canada has committed to spending big on defence, and breaking down bureaucratic silos to do so. But to sustain this momentum, we need to spend smart: new tech, jobs, IP, research and spin-off economic benefits must flow to society.
Public support for increased defence budgets is fragile, and can evaporate just as quickly as it appeared, once short term trade-offs such as debt and taxes resurface. Public support is not a given for defence spending of this magnitude outside of wartime.
RBC has an initial read on the economic force multiplier of defence spending:
Related:
Canadian tech industry gears up for big boost in defence spending [N.B. This event was co-hosted by The Icebreaker, and our friends at Canadian Space Mining Corporation. Thanks to all who attended, and to the Globe & Mail for covering!]
Friend of the Newsletter Christy Sunny on Canada becoming a net exporter of defence tech
Waterloo region's tech companies 'tremendously excited' by federal plan to spend more on defence
The Defence Security and Resilience Bank (DSRB) CEO on how countries can finance reaching the new 5% target
Friend of the Newsletter Philippe Lagassé: it’s still too early to say how exactly it’ll be spent and on what. This may reflect the government’s intention to release a new national security strategy and updated defence policy. DND is also supposed to publish a defence industrial strategy:
📋 Procurement Updates
Breaking up is hard to do
President Trump represents a great paradox for NATO members, and more so for Canada.
Our friends at Publicus AI have produced an analysis of $121B in federal defence contracts from 2019–2025, revealing just how dependent Canada has become on US suppliers.
Double click: Defence Equipment & Vehicles, the largest category, is effectively a US monopoly
96.1% of Canadian government spending goes to General Dynamics Land Systems-Canada Corporation
Only 3.7% stays with Canadian companies despite 1,667 Canadian contracts awarded
Pivot: The data reveals Canada's striking dependence on foreign suppliers. Over the past five years, US companies captured $21.2 billion CAD from Canadian government contracts, while European firms took another $6.3 billion CAD. The new Canada-EU defence pact creates opportunities for displacing US suppliers in categories like defence equipment ($14.5B CAD over 5 years) and military aircraft ($6.7B CAD over 5 years) while providing access to €150B in European markets for Canadian SMEs.
PM Carney has justified the pivot to Europe by saying we “send three-quarters of our defence capital spending to America.” But this is true only in years with major orders, such as F-35s. Historically, Canada has spent only modest sums on U.S. procurement:
Not so fast: Earlier this month, PM Carney and President Trump set a 30 day deadline for a new bilateral trade deal.
Defence commitments, properly structured, could provide important leverage in the deal. The key is linking them clearly to the restoration of tariff-free trade. James Pierlot believes that Canada should not only commit to spending even more on defence, we should also explicitly raise the possibility of buying more from the US, so as to grant us leverage on trade negotiations. A large spending boost could go a long way to advancing tariff-free trade.
Canada’s top soldier said this week Canada should buy additional U.S. F-35 fighter jets and stick with America. The F-35 is the most globally integrated combat aircraft ever built, with deep, multi-billion-dollar contributions and manufacturing from 19 countries including Canada.
Bottom Line: With Canada’s expanded defence budget commitments, we can have our cake and eat it too. Canada can spend more with the United States through increased procurement and joint initiatives, while also strategically diversifying our supply chain via Europe. This approach can strengthen our interoperability with the U.S. and NATO, but deliberately reduces single-point dependencies.
Related:
Diversify from the U.S. for defence? This must include diversifying from Big Tech
🏰 Euro Trip
First person POV: ONE9 Ventures Founder Glenn Cowan with an on-the-ground dispatch from the NATO Summit
Representing ONE9 and Canada’s private capital community at the NATO Defence Industry Summit in The Hague was a powerful reminder that defence investment today is no longer a siloed national enterprise, it is an ecosystem. I was proud to stand as the sole private investor on the Canadian delegation, contributing a venture capital perspective as the Government of Canada scales up to meet its NATO 2% commitment with an additional $9 billion in spending.
The summit convened heads of state, ministers, industry leaders, and innovation drivers. Notable addresses from NATO Secretary General Mark Rutte and European Commission President Ursula von der Leyen cast a strong spotlight on Canada. Both leaders hailed Canada as NATO’s newest full partner in Europe’s strategic defence framework — a public call to action, and a vote of confidence.
Ukrainian President Volodymyr Zelensky’s keynote was unforgettable. With urgency in his tone and intelligence in hand, he warned of Russian plans to expand aggression into NATO’s eastern flank. He stressed that innovation is not optional. His message was clear: wartime adaptation in Ukraine is delivering real-time lessons and the rest of NATO must keep pace — not only in tech, but in mindset and responsiveness.
During two roundtable discussions, I had the opportunity to sit with Minister of National Defence David McGuinty and newly minted Secretary of State for Defence Procurement Stephen Fuhr. Both leaders delivered the same unmistakable message: Canada is ready to move and, as Mr. Fuhr emphasised, “the clock started two weeks ago.” They emphasized that they are no longer tolerating institutional drag and are committed to operationalizing spending through direct collaboration with innovators and investors.
The themes that emerged were as bold as they were consistent. First, government is motivated to act with speed. Minister McGuinty acknowledged past friction in procurement cycles and signalled readiness for real reform. Second, industry is “pushing on an open door.” The political will of Prime Minister Carney is palpable and in the truest principle of military leadership, the PM is “leading from the front” and setting a tone for a much-needed cultural shift inside both federal government and within DND/CAF. Third, the newly allocated $9 billion is not a symbolic gesture. It is a real commitment to deploy capital into capability. And finally, while the United States remains Canada’s core ally, there is a growing recognition that we must diversify our defence markets and partnerships, particularly across the European innovation and industrial base.
From ONE9’s perspective, this summit reaffirmed a strategic conviction we’ve long held: that dual-use technologies, ranging from cybersecurity and AI to software-driven defence platforms, must not only attract venture capital but also align with the needs of modern defence. That means agility, scalability, and seamless interoperability with allied systems. We are not merely investing in the tools of war; we are accelerating capabilities in service of deterrence, resilience, and sovereignty. After all, the most effective conflict is the one we never have to fight—made possible by a posture of strength that echoes the Latin maxim, si vis pacem, para bellum—if you want peace, prepare for war.
The Hague proved that Canada’s innovators, investors, industry giants, and policy leaders are finally aligned in a shared imperative. Defence investment, when done right, isn’t just about military readiness, it’s a catalyst for industrial growth, technological leadership, and strategic independence.
⚔️ Combat Readiness
How Did China Come to Lead the World in Defence Tech?
Many nations manufacture their own weapons and ammunition. But China suddenly became one of the foremost defence technology innovators. How?
The reason is doctrinal: the CCP has pioneered a principle called civil-military fusion. Everything, from AI research at Baidu to quantum computing labs at Tsinghua, is potentially dual-use. The boundary between civilian and military R&D is deliberately porous. Xi Jinping even created a commission to ensure its correct implementation.
That would feel very unusual in the West, where we instinctively separate defence and civilian innovation. But for China it’s a guiding principle. One which has transformed its entire tech ecosystem into a military supply chain:
🍁 Canada’s Inaugural Defence Power 50 List
The Icebreaker is excited to announce the opening of nominations for Canada’s inaugural Defence Power 50 List. The list will recognize the most influential leaders and up-and-comers in the defence community who are critical to making the changes Canada needs.
The selection of this inaugural 2025 list is co-chaired by Erin O'Toole, Glenn Cowan, Philippe Lagassé, Sheldon McCormick, and Eliot Pence.
Bottom Line: Nominate someone we should know about today!
😬 Meme Warfare
(H/T to J.G.)
🔫 Hot Shots
Quantum of Solace: The U.S. Defense Advanced Research Projects Agency’s (DARPA) blockbuster Quantum Benchmarking Initiative (QBI) has challenged 18 firms—including three Canadian ones in Nord Quantique, Photonic Inc. and Xanadu—to prove they can build a useful machine by 2033. Ottawa's own Quantum Advisory Council has recommended a matching program, to keep promising firms Canadian
Double dipping: Last week, we learned that BC Ferries selected state-owned Chinese shipyard CMI Weihai to build its four major new vessels, at a time when China is levelling tariffs against Canada and the federal government is trying to promote the national shipbuilding sector… This week, we learned that a federal Crown corporation is loaning BC Ferries $1 billion for the purchase
A penny for your tweets: How oil traders called the Middle East conflict — open source intelligence and social media posts gave market participants confidence to sell despite turmoil
Rise of defence tech investing: Investor Neil Keegan says the US is making positive changes to how it buys military technology
Major Tom to Ground Control: Cohere is hiring an account executive to lead defence and aerospace
Fear and gratitude: Iconic photo captures Canada's role in a forgotten war — the 75th anniversary of the start of the Korean War
Call him daddy: “Daddy has to sometimes use strong language,” joked NATO secretary-general Mark Rutte, defending President Trump’s use of an expletive in a live interview to admonish Israel and Iran the day before
Moat and dome: Friend of the Newsletter Boris Wertz thinks science is the new moat for Canadian tech… A podcast on Canada's historical position on continental missile defence, and changes to the threat landscape faced by Canada
Market darling: A nuclear submarine contractor’s return to the FTSE 100 symbolizes a new confidence sweeping Europe’s defence industry
Decision Edge: How Obviant is building the “source of truth” for DoD budget, contract, and program data
🤝 See you this afternoon?
The Icebreaker is co-hosting another event during Toronto Tech Week
Defence Tech Patio Drop In, Today: Sign up here to join VCs, founders, operators, defence primes, and the defence-curious, over a few cold beers on a sunny patio.
Stay tuned for details about The Icebreaker’s next patio drop in, later this summer in Victoria, BC.
If you’ve got battlefield intel, classified tips, or just want to call in an airstrike on our typos, hit “reply” and sound off. Whether it’s a new tech sighting, a rumour from the mess hall, or feedback on our comms, we want your SITREP.