KELVIN CHAN - AP Business Writer
•8/27/2026
TORONTO (AP) — As Canada moves to reduce its dependence on American military suppliers, the push is on display inside a Toronto garment factory.
Hunched over sewing machines, two workers rapidly stitch together pieces of camouflage-patterned fabric and Velcro strips. In the next room, workers snip stray threads as they inspect the finished product: helmet covers for the Canadian military.
The factory is assembling uniforms for Wuxly, a luxury parka maker that is among a flurry of Canadian companies branching into defense contracting. As Canadian military spending surges, others are developing remote sensors for the country's vast Arctic region, making drones to resupply soldiers, and building autonomous robots.
The boom in the defense sector reflects Canadian Prime Minister Mark Carney's vow to strengthen the country's economic self-sufficiency amid fraying relations with Washington, including a fresh escalation this week with new rounds of tariffs.
Canadian startups and established companies, alongside firms in Europe, are set to benefit from tens of billions of dollars in extra defense funding, driven partly by pressure from U.S. President Donald Trump to contribute more to NATO. Canada's investment remains small compared with the Pentagon's budget, but its strategy aims to boost domestic defense capabilities, and not just U.S. contractors.
A defense industrial strategy released earlier this year by Carney represents a generational shift for Canada, which invented modern peacekeeping and had long been content to remain in the shadow of its southern neighbor on defense matters.
The defense plan earmarks an additional $60 billion in funding over the next five years, and the government has promised support for domestic businesses to sell into defense and security supply chains. Currently, Canada spends about $36 billion to $43 billion on national defense.
“The scale of investment that is involved is quite significant by Canadian standards, certainly in peacetime,” said Philippe Lagassé, an associate professor at Carleton University specializing in defense policy.
The defense boom is “quite evident at all the events we’re at. Every defense show (is) sold out. Lots of new companies and (other) industries coming into the (defense) industry, getting involved,” said Wuxly founder and CEO James Yurichuk.
Wuxly's helmet covers, destined for the Canadian Armed Forces, allow soldiers to attach call sign patches or gear like lights, cameras and beacons. The company also makes military parkas and tank covers and has been supplying Ukraine's military with gear, including 40,000 female uniforms — one of the company's specialties.
Carney has called for upgrading the Canadian military’s Arctic capabilities, increasing spending by tens of billions of dollars to assert sovereignty over the vast but sparsely populated and increasingly contested region.
“There’s a lot of innovation that can create advantage in the North, and with the Arctic region being so important, we’ve got to clothe our soldiers properly," Yurichuk said.
A major part of the strategy is diversifying away from U.S. defense contractors. It focuses on tapping a wider global pool of suppliers of military hardware — and fostering domestic defense supply chains.
The strategy envisions investments amounting to more than half a trillion dollars, creating 125,000 jobs and tripling the size of the country’s defense industry over the next decade by steering contracts to Canadian companies. It calls for accelerating research and development and prioritizes developing key “sovereign capabilities” including aerospace, robotics and unmanned systems.
As Canada pursues partnerships with other allies, in addition to the United States, Ottawa has announced deals this year to buy radar planes from Sweden’s Saab over American competitors and submarines from Germany’s ThyssenKrupp.
Canadian startups like New Frontier Robotics also are lining up to play a part.
“There definitely is money in play,” said Nikhil Malhotra, co-founder of the two-person company. “We see it. Obviously, we are going for it.”
The company is working on a mobile manipulator robot — essentially a robot arm on a mobile platform — powered by artificial intelligence that could have both military and civilian applications, in what's known as dual-use technology.
The initial plan was to target manufacturing, with robots working autonomously between assembly lines, but potential customers suggested there was also a growing need from the defense industry. Robots could also be used for support roles at military bases, Malhotra said.
“If you have infrastructure up in the Arctic that needs maintenance, obviously the climate is very dangerous. Are you really willing to risk an operator’s life? The answer is no. It’s better to put this thing on,” said Malhotra, whose company is based temporarily at a robotics lab at the University of Waterloo, about 60 miles (100 kilometers) west of Toronto.
Canada’s efforts to modernize its war machine still face big potential challenges, including the risk that opposition parties target Carney’s spending plans in future elections.
Companies that develop novel technologies could be lured to the U.S. by its much larger defense market. It also will be tough for Canadian companies competing against American counterparts with much bigger research and development budgets that mean they are “always going to be a bit more at the edge of the technological capability,” Lagassé said.
Still, the strategy opens new possibilities for companies like drone maker Volatus Aerospace, based near Montreal.
“Defense was not a popular topic for a small-cap Canadian public company in the past,” CEO Glen Lynch said.
Lynch said Canada has had limited manufacturing capability not just for drones "but manufacturing capability in general.”
Like New Frontier, Volatus' technology is considered dual use. Because Canada is technically not at war, companies can't rely on selling exclusively to the military.
Volatus makes drones and related services for civilian and commercial uses, such as air dropping medicine to isolated communities. But it also has a defense unit and makes first-person-view drones, also known as kamikaze drones, which take out targets by crashing into them.
The company does some testing at a 100-acre site north of Toronto accessed by an unmarked gravel road and surrounded by fields of corn. Volatus employees demonstrated several aircraft on a recent visit by The Associated Press.
The company showed off a drone with a 60-kilogram (132-pound) payload slung underneath by cable, and a scaled-down drone with tilt-wing rotors that can carry cargo over long distances. In a demonstration, the drones operated autonomously and flew in a circular pattern before landing.
One drone, dubbed the Canary, has payload bay doors and is used to airdrop medical supplies to remote indigenous First Nations communities in Alberta.
It could also be used to send “resupply packages for soldiers” as well as dropping munitions, said Chief Operations Officer Greg Colacitti.
