Not Just F-35s, Over $35B U.S.-Canada Military Deals On Line As Ottawa Reviews Its Contracts

One of the first things that the new Canadian Prime Minister, Mark Carney, did after taking office earlier this year was to put the over US $14.2 billion F-35-A Lightning II deal under review amid rising tensions with the United States.

The review will be published by the end of this summer.

However, the deal to purchase 88 F-35A Lightning II fighter jets, signed in 2023, is just one of the many deals signed between Ottawa and Washington, even if it’s the most high-stakes one.

The total value of deals contracted between Canada and the US, deals which have been signed but not yet completed, is worth more than USD 35 billion.

Any unfavorable decision by Canada on the F-35 deal, currently under review, can open a Pandora’s box and have a domino effect on all these defense deals.

The stakes are high as Prime Minister Carney made reviewing defense deals with the US a central plank of his election campaign. During those days, the atmosphere in Canada was highly critical of the US, over President Donald Trump’s almost daily threats to make Canada the 51st state of the United States of America.

Carney rode the anti-American wave in Canada, which helped the Liberal party return to power in Canada for a record fourth time, despite strong anti-incumbency.

However, scuttling defense deals with the US will not be an easy decision, as Canada, which depends on the US for its overall security, will have to face repercussions if it decides to end the already contracted deals with the US.

The F-35 Saga

In January 2023, the Canadian government inked a CAD19 billion (US$14.2 billion) deal with Lockheed Martin to acquire 88 F-35 fighter jets in four tranches by 2032. The purchase was meant to replace the aging CF-18s of the Royal Canadian Air Force (RCAF).

However, Prime Minister Mark Carney announced earlier this year that he would review the purchase of the F-35 beyond the 16 that have been paid for and are expected to be delivered next year.

The review came as the US President Donald Trump imposed unprecedented tariffs on Canada, humiliated the Canadian leadership, and called on the country to become the 51st state of the US.

The Canadian government earlier asserted that it needs to “make sure that the contract in its current form is in the best interests of Canadians and the Canadian Armed Forces.”

After putting the purchase under review, the Carney government also indicated that it was mulling the option to buy a European jet. Three different 4.5th-gen fighters, including the Rafale, Eurofighter Typhoon, and the Gripen-E/F, have since been in the reckoning. However, no decision could be made unless a final decision on the F-35A purchase is taken.

Carney made a bold move by choosing Europe as the destination for his first foreign visit, instead of the traditional choice of the United States.

A Parliamentary Budget Office (PBO) report published in November 2023 estimated that the cost to Canadian taxpayers of owning and operating a fleet of F-35 fighter jets over the next 45 years would reach a whopping US$73.9 billion. This calculated sum included the aircraft’s life cycle costs, from planning and development to use and disposal, as previously reported by the EurAsian Times.

A more recent report from Auditor General Karen Hogan stated that the planned purchase of F-35A fighters by Canada is facing a host of challenges, including skyrocketing costs, a lack of critical infrastructure, and a shortage of trained pilots.

According to the audit report, the estimated cost of the F-35 program has climbed to CAD 27.7 billion, up from the CAD 19 billion projection made by the National Defense in 2023.

The audit estimated that at least an additional CAD 5.5 billion would be needed to secure weapons and vital infrastructure, such as operational bases.

Canada’s Dilemma

For now, the Canadian government is continuing with its review and is expected to publish its decision by the end of the summer.  

However, this is not going to be an easy decision for Canada.

Writing in the Canadian media outlet CBC, senior defense reporter Murray Brewster suggested that, at this stage, it will be challenging to sell the decision, whatever it may be, as purely driven by defense needs.

“The Liberal government, senior officials and even the chief of the defense staff have taken pains to downplay the political aspect and emphasize that when a new government takes over it is natural to review big purchases. Fair enough. But these kinds of reviews are usually done quietly, behind the scenes and not blasted all over the airwaves.”

That Canada’s F-35 review has irritated the Trump administration is clear from the remarks of the US ambassador to Canada, Pete Hoekstra.

Speaking to a Canadian podcaster in August, Hoekstra said that the ongoing review is “an irritant that makes it harder to get to a [trade] agreement.”

Earlier, the US had suggested that not buying the F-35s would endanger NORAD, the binational defence pact with the United States.

While officially Canada is reviewing the F-35 deal, Ottawa understands well that if it decides to scuttle the deal, it will face blowback on a host of issues, among them a trade deal, joint military exercises, and intelligence sharing.

Furthermore, the F-35 is not the only defense deal in the pipeline between the two countries. If Canada ends the F-35 agreement, the government could be under pressure to review those defense deals as well.

Many Other Defense Deals In The Pipeline

Currently, deals worth more than USD 35 billion are in the pipeline between the US and Canada.

Among them is the deal for the U.S.-manufactured High Mobility Artillery Rocket System (HIMARS) for the Canadian Army (worth roughly US$750 million).

The combat management system for the new River-class destroyers, developed by the Canadian arm of an American defense contractor but highly dependent on its U.S. parent for upgrades (US$2.3 billion for the first four Aegis ship sets).

The deal for 17 P-8A Poseidon Maritime Patrol Aircraft (worth US$10.4 billion). The contract for this deal was signed in 2023, with first deliveries expected by 2028, and the whole fleet by 2032.

The deal for 11 MQ-9B SkyGuardian Drones, signed in December 2023, worth US$1.87 billion. The MQ-9B drones are expected to be delivered by 2028.

Together with the F-35 contract, these deals are worth more than US$35 billion.

These contracted defense deals with the US are becoming a political headache for the Canadian government.

A Pew Research Center survey from July found that a majority of Canadians (55 per cent) name the U.S. as Canada’s top ally, but also the country’s top threat (59 per cent), for both economic and national security.

Retired Vice-Admiral Mark Norman, the former Vice-Chief of the Defence Staff, told the CBC news, “There’s no denying that there are some sensitivities.”

“I think these conversations are absolutely essential as we go forward and try to stand on our own two feet. The issue is that we need to be very careful that we don’t inadvertently create some unintended problems here,” said Norman.

He suggested that American defense contractors may accept some adjustment, but not a wholesale realignment in Canada’s shopping practices.

Furthermore, Norman warned that there is some potential to “punish Canada” if it walks away from these contracts.

“Every one of those programs that you listed has huge vulnerabilities with respect to our continued dependence on not just U.S. supply chains, but on U.S. access and U.S. technology,” Norman said.

It will be interesting to see what Canada decides on the F-35 jets, how that decision is sold to the Canadian public, and how it impacts the other US-Canada defense deals currently in the pipeline.

What can be said at this juncture is that for Canada, there are no easy options.