Ottawa to consider economic security for review of foreign investments

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Ottawa – In the trade war with the United States, the federal government will now see Canada’s economic security as a justification for a domestic security review of Canada’s foreign investment that could block or subvert the deal.

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In a statement Wednesday morning, Innovation Minister François-Philippe Champagne said he had made changes to the Canadian Investment Act (ICA) (ICA) guidelines that would allow the government to review “opportunistic or predatory” foreign investment more broadly.

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Champagne’s statement skewed the trade dispute between Canada and the Americans, part of the reason the government will review foreign acquisitions, mergers or investments that could undermine the country’s economic security.

“Some Canadian businesses may see their valuations drop due to the rapid changes in the trade environment, leaving them vulnerable to opportunistic or predatory investment behaviors by non-Canadians,” Champagne wrote.

He added: “When these businesses are important to Canada’s economic resilience due to their size, impact on the innovation ecosystem or their position in the Canadian supply chain or the allies we rely on, it will conflict with Canadian interests to enable them to cause victims of such behavior to the security of Canada’s economy.”

The change came the day after U.S. President Donald Trump’s 25% tariff on all Canadian and Mexican goods, sparking retaliatory tariffs from Canada and launching a U.S. trade war with its two closest trading partners.

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On Tuesday, Prime Minister Justin Trudeau said Trump’s target of tariffs is a “complete collapse” of the Canadian economy to annex the country.

“One of the things he said repeatedly is that he wants is to see a complete collapse of the Canadian economy because it will make it easier to annex us,” Trudeau said of Trump.

A senior freelance profile from the Champagne office said the latest ICA guidelines are not a direct response to the Trump administration’s increasingly aggressive economic action to Canada, but they are not irrelevant either.

They are anonymous because they have no right to discuss the changes publicly.

If the government has the right to have a potential impact on Canada’s defense capabilities and interests, sensitive technology or intellectual property (IP) may be transferred outside Canada, which may affect access to critical goods and services or involve critical infrastructure.

The ICA guidelines state that the government can also review any investment that can enable foreign espionage, hinder intelligence gathering and foreign relations, or help criminals.

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But until now, the minister cannot regard the impact on Canadian economic security as a reason to review transactions. The new guide provides governments with a broad new reason to review foreign investment.

In a statement, the Department of Innovation, Science and Economic Development (ISED) cites the size of the Canadian business involved in the transaction, the company’s position in the innovation ecosystem and the impact on foreign investment in the Canadian supply chain are factors that may trigger scrutiny.

“In an increasingly geopolitical world, Canada faces more frequent threats to its national security through economic means,” the ISED statement said.

“It is therefore important to continue to adapt to the threats to ensure that Canadian interests are fully protected.”

Sources say a foreign company trying to buy multiple electric vehicle battery plants in Canada is a hypothetical example of the new deal that could be under scrutiny and potentially blocked under the new guidelines.

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Trump often promises to bring auto manufacturing back to the United States entirely, damaging the Mexican and Canadian industries that are deeply integrated with the U.S. supply chain.

Dennis Molinaro, a former national security analyst, said the update is important because the current national security review factors are too narrow to properly protect Canada’s economic interests.

“The threat environment has changed dramatically. “There is still risks and threats to allow investments that conflict with Canadian interests,” said Oshava Ontario University of Technology.

“For example, perhaps an investment does not pose any immediate national security threat, but rather endangers Canada’s control over certain important IP or rare earth minerals. In the long run, if Canada loses control, these things will harm Canada’s interests and economic security and ultimately harm national security.”

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