How have exchange rates, inflation, and Canada–U.S. procurement terms affected the final Canadian payment for its F-35s as of 2025?
Executive summary
Canada’s planned purchase of 88 F‑35As was budgeted at roughly C$19 billion for acquisition while lifecycle costs were previously estimated at about C$70–74 billion; a 2025 Auditor‑General review and media audits now put the acquisition alone at roughly C$27–33+ billion — an increase of about 46–50% over the original figure [1] [2] [3]. Exchange‑rate swings, inflation and the structure of Canada–U.S. procurement arrangements are recurring drivers cited in government and auditor reporting for the higher final Canadian outlay [4] [1] [5].
1. Currency and timing: U.S. dollar pricing exposes Canada to exchange‑rate risk
Canada agreed to buy U.S.‑built F‑35s priced in U.S. dollars; that leaves the Canadian bill sensitive to USD/CAD moves between commitment dates and final payments. Auditor and parliamentary reporting document committed payments into U.S. production lines (for example, payments committed to the U.S. for early jets and long‑lead items), and the Department of National Defence records amounts in Canadian dollars, meaning any USD appreciation raises the CAD cost of the same U.S. invoice [4] [6]. Sources note Canada had committed US‑dollar obligations as of March 2025 — $935 million committed to the U.S. for production and long‑lead items — which crystallize exchange exposure when converted into Canada’s budget framework [4].
2. Inflation and defence‑industry cost escalation: procurement budgets stretched
Independent fiscal work and the Auditor‑General conclude that rising unit and life‑cycle estimates reflect not only exchange moves but general inflation and program cost growth. The Parliamentary Budget Officer put acquisition-phase costs at C$19.8 billion within a total program lifecycle near C$73.9 billion, but the Auditor‑General found acquisition costs jumping toward C$27–33+ billion in 2025 audits — a near 46–50% escalation attributed to higher purchase, sustainment and ancillary infrastructure costs [1] [2] [3]. CBC and The Globe report the AG’s finding of “skyrocketing costs” and emphasize shortages in pilots and infrastructure that further raise the effective program expense [5] [7].
3. Procurement terms with the United States: framework, commitments and limited levers
Canada’s acquisition sits inside multilateral Joint Strike Fighter framework arrangements and a bilateral arrangement finalized in December 2022; those memoranda and the U.S. production contract establish how Canada collaborates with partner nations and how payments and production slots are secured [4] [6]. The Auditor‑General notes Canada had committed funds to U.S. production and paid down initial amounts — moves that reduce Canada’s scope to renegotiate price once long‑lead items and production lots are underway [4]. Available sources describe framework MOU mechanics and committed payments but do not provide the full text of contractual change‑of‑price clauses; available sources do not mention whether Canada retained robust formal protections against currency or inflation escalation in every tranche [4].
4. Unit‑price vs. life‑cycle sum: headline costs can mislead the public debate
Early public figures emphasized per‑jet dollar amounts (AP reported roughly US$85m per jet in 2023), but federal and independent analyses stress that acquisition is only part of the fiscal story: sustainment and operations through the program life dominate total cost estimates. The Parliamentary Budget Officer estimated operations and sustainment at about C$53.8 billion beginning 2025–26, which is why lifecycle totals of roughly C$70–74 billion remain the dominant fiscal metric even as acquisition figures shift [1] [6]. Commentators and officials warn that focusing only on aircraft unit cost understates long‑term fiscal exposure [1] [8].
5. Alternative viewpoints and political context: critics, proponents and industrial offsets
The Auditor‑General and fiscal offices focus on governance, risk and rising cost estimates [4] [5]. Government sources and industry stress economic benefits: by January 2025, Canada reported over US$3.3 billion in contracts awarded to Canadian industry tied to the F‑35 program, a point used to justify continuation despite higher acquisition totals [9]. Commentators argue for alternatives (cheaper fighters or drones) on cost grounds [8]; others highlight strategic and interoperability reasons for sticking with the F‑35 and the jobs tied to industrial participation [9] [8].
6. What remains unclear in current reporting
Reports document exchange exposure, inflation and contractual commitments as contributors to higher Canadian costs, and the Auditor‑General quantifies rising acquisition estimates and lifecycle risks [2] [4]. However, available sources do not provide granular line‑by‑line accounting showing exactly how much of the C$8–14 billion acquisition increase is attributable to exchange‑rate changes versus inflation, scope changes, infrastructure shortfalls, or unit‑price increases; available sources do not mention detailed contractual currency or escalation clauses that would show Canada’s explicit legal hedges [2] [4].
Bottom line: as of 2025, published audits and fiscal analyses show Canada’s F‑35 acquisition and life‑cycle bill well above original figures; exchange‑rate exposure, post‑pandemic inflation and procurement commitments into U.S. production are documented drivers, while industrial offsets and strategic interoperability are cited by proponents to justify higher nominal costs [1] [2] [9] [4].