Canada is demanding major investments in steel, automobiles, and energy from Korean and German companies bidding for its approximately $40 billion next-generation submarine project (CPSP). As tensions with the United States have escalated under President Donald Trump's second term, Canada aims to reduce its economic dependence on the U.S. by leveraging the defense project as a catalyst for reviving traditional industries.
According to the Financial Times and other outlets on the 8th (local time), final bids for CPSP are scheduled for next month. The project involves building up to 12 diesel submarines and represents one of Canada's largest defense investments since World War II. A consortium of Korea's Hanwha Ocean and HD Hyundai Heavy Industries is competing against Germany's ThyssenKrupp Marine Systems (TKMS) in the final round.
However, Prime Minister Mark Carney's government has made clear it will not treat this project as merely a defense procurement for military capability enhancement. Beyond submarine performance, the government will evaluate what added value Korea and Germany can provide to the broader Canadian economy. Steven Fuhr, Canada's Special Minister for Defense Procurement, stated the contract will be awarded to "whichever side presents the greatest economic opportunity."
The Canadian government's approach is interpreted as an effort to address concerns over changing security environments and economic slowdown. Canada possesses the world's longest coastline, making underwater capabilities for constant surveillance and response across the Atlantic, Pacific, and Arctic essential. With Canadian manufacturing taking direct hits from high tariffs and protectionist policies since Trump's second term began, the government calculates this project can simultaneously reinforce industrial foundations. Canada's economic growth rate remains below 1%, with unemployment hovering around 6%. Xavier Delgado, a researcher at the Conference of Defence Associations Institute, said, "Prime Minister Carney is using this bidding competition as a rare opportunity for Canada. This is literally 'The Art of the Deal, Carney-style.'"
The new automotive industry strategy recently announced by the Canadian government is also drawing attention as a significant variable in the CPSP competition. On the 5th of this month, the Carney government unveiled an automotive industry restructuring strategy centered on electric vehicles and designated manufacturing and supply chain reorganization as core national priorities. Analysts suggest this plan to reduce U.S. dependence and secure independent industrial competitiveness is operating in tandem with the submarine competition.
With final bids approaching, each side is deliberating expanded support packages to meet the Canadian government's demands. Hanwha Ocean recently signed a memorandum of understanding with Ontario-based Algoma Steel to build a new $253 million steel beam plant. Algoma Steel recently laid off 1,000 workers due to U.S. tariff impacts, making this investment discussion symbolically significant for Canadian manufacturing recovery. The Canadian government reportedly expects cooperation in the automotive industry from Hyundai Motor Group, which is supporting the Korean bid. However, Hyundai Motor Group is said to be reviewing cooperation plans including hydrogen energy to support clean energy transition instead.
Germany has reportedly proposed a package including expansion of local production facilities through Volkswagen, along with cooperation in space and rare earth sectors. Germany has also proposed incorporating Canada into its existing submarine partnership with Norway to build a joint Arctic fleet. Based on solidarity among NATO member states, Germany's offer to share joint training and operational systems is viewed as a key strength.
Locally, there is an encouraging atmosphere with Canada's hardline negotiation strategy yielding results. However, some critics argue the government is excessively focused on reviving domestic industries and political interests rather than addressing security gaps through the defense bid.