On Trade & Defence & Stuff

Noah Note

Of course everything has to happen the week I am out of country. It wouldn't be a trip if there wasn't some drama back home!

Trade talks between Canada and the United States have failed, with both sides claiming the other's last-minute changes as the pretext for the breakdown. Now, details at this time still remain very scarce. Of course, at least this time there is no 13-hour difference for me!

I was originally just not going to talk about this, but so many of you asked that I felt the need to address it. Quite a few of you wanted my thoughts on the situation, which, while important, is still a bit out of our scope as a defence publication.

I won't pretend to be an economist, nor a trade negotiator. I leave that to the others of the world. I can't say what exactly happened here or where the faults were, though I guess we all have a collective suspicion Howard Lutnick is to blame here.

Either way, talks have collapsed. That is the important note here above all. The Prime Minister recalled negotiators the other night, and we are now staring down a further stretch of retaliatory measures and back-and-forth.

How far that goes I can't say, even on the defence side, though the defence side of things, for now, has been somewhat insulated from retaliation and actions. We've been lucky in that regard that the strategic relationship of the United States and Canada has been locked in a "tense but quiet" format.

There are no restrictions in place, cooperation continues to advance steadily, we continue to purchase American equipment, we're moving forward on the ICE Pact, and Canadian industry is still allowed unparalleled access to the American market through things like the DPSA.

While there have been some bumps along the way, such as with the recent pausing of participation in the Permanent Joint Board on Defence by the Americans (which itself hasn't met in years, to remind you), the overall relationship has remained more or less similar to the last.

Many other rumoured issues, such as the ability of American companies to get proper authorizations through things like TAA to participate in Canadian procurements, are again still rumors, and neither confirmed nor confirmed to come from malice.

Indeed, compared to many, while the industry in several aspects is being hit, the pure defence-related retaliations are likely to remain minimal in the immediate, and likely going forward still. There is, of course, little reason for the Americans to block FMS or restrict the Canadian defence industry that itself feeds primarily into the American Defence Industrial Base at a time of mass expansion and rebuilding critical stockpiles after the Iran War.

I also didn't want to comment too quickly. Details are still scarce, and the Trump administration is no stranger to causing drama on a Friday only to see the market reactions on Monday and pivot. As such, I like to wait a few days to make any clear judgements one way or the other.

Jumping in immediately with this stuff usually makes a fool out of someone later on. That is especially true of such serious discussions. So I am watching with a bit of a side-eye before I jump into comments and speculation on the future.

We've gone through these ups and downs now more times than I can count over the last year, and I am not ready to comment every time drama comes up on trade. That said, we can talk about the defence side as it relates to rumoured demands.

In this case, the Trump Administration has been clear on three major contention points with defence:

• Complete the F35 order

• Align on Golden Dome/NORAD Mod

• Purchase more from American Industry

None of these are new demands from the American side—far from it. Golden Dome has been a demand since the start. There is room to interpret a bit what the American side is asking.

I assume that they are demanding the whole 88 F35 order move forward, though there is a timeline I believe where they could accept less without much of a fuss, depending on if they perceive a reduction as breaking terms.

Yes, we are only contracted at this time for 16 F35s, with long-lead items ordered to secure our spot for a further 14. While that is all well and good for us, for the Americans the question of interpretation can mean vastly more things than for us, and it is here that the point becomes a bit open-ended.

The Americans, I imagine, see a commitment as fairly firm. If they know we planned and committed to 88, they are likely to see any significant reduction as breaking the "spiritual" agreement in place. The room for interpretation, therefore, is whether any reduction is possible under the current administration.

Would Americans be okay with 70? 65? There have even been rumors of the Americans asking us to order more, though I have yet to get any serious confirmation there beyond a few people mentioning it. Either way, as I stand here in Sweden soon to see more Gripen, the question remains also on whether the Americans really care about a mixed fleet if we stick to a significant F35 order.

And the truth is likely that it depends, and who wins out depends on who ends up carrying the influence on the file. I am sure someone like Howard Lutnick cares deeply about it, while others certainly do not. Whoever wins the faction war for the choice of a Canadian mixed fleet is yet to be decided, as that choice isn't made yet.

However, I do not see the Americans outright blocking such a choice, such as, say, restricting the export of American components present in Gripen in the event of a Canadian order. Beyond the obvious reasoning of trust and destroying confidence in American suppliers, it is also not to be ignored that the Gripen E itself still has major American components, and those same companies are unlikely to allow the United States to restrict sales without some pushback, especially not on a potentially significant order.

A custom GE F414 Engine, a display from Collins Aerospace, Moog, L3Harris, Curtiss-Wright Controls, and even critical components like the TRM on the Raven ES-05 come from American suppliers.

Gripen E still feeds into the American Defence Industrial Base quite substantially, and still supports the American desire to see Canada spend more on defence. Restricting its potential sale, especially in a heavily ordered F35 environment, is ultimately self-defeating and counterproductive to American desires, and punishes industry more than anything.

Certainly, in my own conversations with Saab, they have heard no objections or seen no reason to be concerned with potential export to Canada. Now, this administration is admittedly unpredictable and a bit self-defeating in some of their actions, but this is one where I don't think, if the stars aligned, we would see American resistance.

On Golden Dome, this is a bit of a tossup. Naturally, there are areas where cooperation is going to likely develop naturally, and those areas (Space, Effectors, C2) already make up a significant portion of the IAMD portfolio. The big thing here is, again, uncertainty.

What does alignment look like to the Americans? What sections of Golden Dome, because remember it's an initiative, do they expect cooperation in? A lot of the GD portfolio is still up in the air, and expectations between parties can easily become a tension point if not clearly defined from the start.

We get moments like this weekend, where different expectations and definitions turn into failure points when those areas are not clearly mapped out. Vague "Buy our shit to align with Golden Dome" doesn't work with a broad portfolio like IAMD, where a whole bunch of different capabilities could hypothetically be included. Does it include stuff like CUAS, for example? Does it include certain infrastructure? Would the Americans expect us to use American suppliers for, say, VLF or HF modernizations?

IAMD was always likely going to be an area where we align fairly well just by letting things naturally take their course. Much of the current environment existing is already looking fairly American in nature, and natural American primes like Lockheed, Raytheon, and the American side of BAE Systems already have a sizable foot in the door and the alignment case to existing products to be highly competitive.

So for Golden Dome, the current knowledge of what was asked is too vague to be of much debate for us. How do we align with something where a hundred or more procurements could exist over its lifetime?

Part of why I didn't want to jump in is all these unknowns. We just don't know the needed details to judge what is being asked and what hardlines may exist. There is too much uncertainty on the American side to really judge vague statements that aren't just rampant speculation on my end.

This latest gaffe, though, does again call into question reliability, and the question of how deep the American relationship goes. How far do we take it before we say enough is enough and this is where cooperation hits its limits? All cooperation, save total integration, ends somewhere along the way. There is zero wrong with that; that's what naturally happens.

There is further debate when we look at areas such as energy and critical minerals, where American industry and investment remain heavy, but which we are also aiming to use as leverage with international allies such as Germany, Japan, and Korea to help diversify our trading relationships.

These, of course, are topics all worth their own posts, but I wanted to just get out my initial thoughts. Obviously, as more comes out, we will dive deeper into this. For now, though? We can sadly only really wait for info before discussing consequences and paths forward. I also think we should see if negotiations stay stalled long term. That, too, is another important factor in all this.