Canada and Sweden have much in common. Both are democracies with constitutional monarchies. Both have open, export-oriented economies. Both have spent a century managing a great-power neighbour. And both are endowed with iron and base-metal resources, vast boreal forests, and abundant freshwater. (Even their strawberries, slow-grown under northern light, taste alike.) It makes sense, then, for them to sign a new strategic partnership on defence production, Arctic security, critical minerals, advanced manufacturing, and emerging technologies.

But this agreement is about more than mutually beneficial co-operation. For Canada, it is a sorely needed hedge: a long-overdue attempt to reduce its dependence on the United States. And for Sweden, it is a power play: a way to consolidate its new role as a Nato ally. The agreement thus serves Canada’s need for insurance and Sweden’s bid for influence and market share.

Few other advanced economies are as structurally reliant on a single neighbour as Canada. The United States buys most Canadian exports, supplies much of its technology, and dominates its defence procurement. For decades, this dependence felt safe. But after President Donald Trump imposed tariffs on steel and aluminium, forced a renegotiation of the US-Mexico-Canada Agreement, and started talking about annexing Canada, dependence became an intolerable vulnerability.

Sweden, meanwhile, is approaching the same problem from the opposite direction. After decades of non-alignment, it finally joined Nato following Russia’s full-scale invasion of Ukraine. It brings to the alliance a capable military, a sophisticated defence industry, and a political culture that treats preparedness as a civic duty.

Its “total-defence” model (totalförsvar) integrates military and civilian readiness across society – from ensuring ample food and fuel stockpiles to maintaining plans for keeping hospitals, ports, and power grids running in a crisis. Sweden has spent a century designing machines that work in dark winters, deep forests, and icy seas – exactly the conditions that Canadian machine operators also contend with.

The new partnership mirrors this complementarity, but it also exposes a disagreement about how tightly to lean on the US. Canada wants to end its reliance on a single supplier for essential military and industrial systems, because it is looking ahead to a world where it will be less exposed to US decisions. But Sweden wants to bind itself more closely to the US-backed system that Nato represents, because it recognises that geography and neutrality no longer guarantee security. Over time, these distinct views could pull in different directions.

Both sides are focused on defence. Canada has defaulted to using US fighters (F-35As) and patrol aircraft (P-8As), because shared kit makes operations and maintenance easier. But it also concentrates risk. When one supplier dominates procurement, it also dominates negotiations. Sweden’s Gripen fighter, built for dispersed operations from rough northern bases, is one of the few serious non-US alternatives.

To be sure, shifting even part of the Canadian fleet to a mixed Gripen/F-35 force would be politically and logistically difficult. The mere thought of it has already drawn fire, with retired Canadian officers warning that any reduction in F-35 purchases would weaken the force, while US commentators argue that a mixed fleet would be costlier, less interoperable with the North American Aerospace Defence Command (NORAD), and weaker in an Arctic fight.

But this might be a price worth paying. If Canada shifted even part of its procurement to Gripens and assembled aircraft in Canada with Swedish support, it would regain some industrial and strategic autonomy. Sweden, meanwhile, will have increased its weight within Nato. The only question is whether the US would view this as increased burden-sharing (something it purports to want) or a loss of its own industrial advantage.

The next phase of great-power competition is being fought through supply chains and logistics – through battery metals, rare earths, telecom standards, and grid hardware. As Trump officials have apparently learned the hard way, China dominates too many of these links.

Fortunately, Canada brings vast reserves of minerals, land, and energy, and Sweden has a strong record of translating engineering and manufacturing ideas into dependable machinery. Together, they can form a corridor from extraction to finished products, offering a hedge for Nato’s industrial base against shocks from a single supplier. For Canada, it is a way to avoid overreliance on US buyers and technology; for Sweden, it is another arena in which to bolster its Nato role.

This corridor will have its limits, though. Canada and Sweden are both export powers, and in some markets, they are potential competitors. Both sell vehicles and parts abroad, both depend on forest products, and both want a foothold in the same green-technology and infrastructure niches. Sweden is subject to the European Union’s industrial and state-aid rules while Canada is bound up in North American supply chains. A northern production axis will have to work within those constraints.

Still, the partnership allows Sweden to gain a North American foothold without going through Washington. It is deepening its industrial ties with another advanced economy, and assuming a bigger Arctic role with another Arctic country. Nato, too, is getting something it urgently needs: a northern flank that is more capable, more distributed, and less exposed to swings in US politics. At a time of growing fragility within the West, Canada and Sweden are offering a new model to restore resilience.

Of course, both still ultimately depend on the US for security. Nato’s command structure, its long-range strike capability, and much of its logistics are American. NORAD is, and will remain, the backbone of North American air and missile defence. A Canadian-Swedish axis can thicken the non-US part of the system, but it cannot replace it. Moreover, Canada may still default to buying American, Sweden’s defence buildup may face political or fiscal constraints, and the US may block Swedish systems from finding their way into a core ally’s arsenal.

The northern hedge is best understood as a modest, deliberate shift in how two middle powers organise their dependencies. Canada gains breathing room, and Sweden gains leverage in debates about the Arctic, burden-sharing, and how much of Nato’s future arsenal must be “Made in America.” At a time when “friendly” powers can feel unpredictable, middle powers can adjust with small, deliberate choices of their own. Keep an eye on larger US allies like France, Italy, and Spain, smaller ones like Finland and the Netherlands, rising ones like Poland, and formally neutral countries like Switzerland. All will be exploring new paths to influence and autonomy. — Project Syndicate

  • Carla Norrlöf is Professor of Political Science at the University of Toronto.