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Canada reviews $13.29-billion fighter jet contract amid trade war with US

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Canada's defense spending under pressure from US, aims closer to NATO target by 2030

(Releads with Carney comments paragraphs 1-5 and last paragraph, comment by Bombardier CEO paragraph 7)

By David Ljunggren

OTTAWA, March 17 (Reuters) - Canada is looking for possible alternatives to its deal to buy U.S. fighter jets in part because it relies too much on the United States for security, Prime Minister Mark Carney said on Monday.

Carney made the comments just days after ordering a review of a C$19-billion ($13.29 billion) contract for 88 F-35 fighter jets from Lockheed Martin ( LMT ). Canada is locked in a trade war with the United States.

Canada's defense ministry says the contract remains in place and Ottawa has made a legal commitment of funds for the first 16 F-35 aircraft. Carney made clear Canada would seriously look elsewhere.

"It is clear that our security relationship ... is too focused on the United States. We must diversify," he told reporters during a visit to London, noting that Canada spent about 80% of its defense budget on American weapons.

"Given the need for value for money, given the possibility of having substantial production of alternative aircraft in Canada ... it's prudent and in the interest of Canada to review those options," he said.

Carney did not mention specific firms. Sweden's Saab , which lost out on the fighter jet contract to Lockheed Martin ( LMT ), had promised to assemble its planes in Canada.

Canadian firms also benefit from the relationship. Bombardier CEO Eric Martel said he was concerned Washington could target the planemaker's U.S. contracts if Canada canceled the Lockheed Martin ( LMT ) deal.

U.S. President Donald Trump has slapped tariffs on Canada and mused about turning it into the 51st state.

Philippe Lagasse, a professor at Carleton University who specializes in procurement, said buying 16 F-35s and then adding another jet would be expensive.

Canada, pressured by successive U.S. administrations to increase defense spending, last year pledged billions more for the armed forces and said military expenditures would be closer to the NATO target by 2030.

In a statement, Lockheed Martin ( LMT ) said it valued its ties with Canada and referred procurement questions to the government.

The U.S. Defense Department did not respond to a request for comment.

U.S. CUT OFF INTELLIGENCE SHARING WITH UKRAINE

Washington this month briefly cut off intelligence sharing and weapons shipments to Ukraine, raising questions about the potential perils of becoming too dependent on U.S. systems.

Canada and other allies are largely dependent on the United States for other support, such as the ability to identify targets, process data and suppress enemy air defenses.

"There are a lot of people rethinking right now, 'How reliable is access to American military technology going to be?'" said David Perry, a defense expert who serves as president of the Canadian Global Affairs Institute think tank.

"All of the options, beyond sticking with our status quo plans, are much less good."

Canada signed the F-35 deal in 2023 and said it expected the first plane to be delivered in 2026.

Ottawa has repeatedly extended the lifespan of its fleet of Boeing CF-18 fighters, some of which are more than 40 years old. They are due to fly to 2032, the point at which all 88 F-35s are supposed to be operational.

Moves by European nations to boost defense spending could be beneficial since they might open the possibility of more work for Canadian firms, Carney said.

($1 = 1.4298 Canadian dollars) (Reporting by David Ljunggren, editing by Caroline Stauffer and Rod Nickel)