Canada’s FDI Surge Driven by U.S. M&A Raises Sovereignty Concerns
Foreign direct investment in Canada hit a near-18-year high in 2025, but the influx is heavily skewed toward U.S. mergers and acquisitions rather than new productive capital, prompting government efforts to diversify global investment sources.
Foreign direct investment (FDI) into Canada reached nearly $100 billion in 2025, marking the highest level since 2007. Prime Minister Mark Carney highlighted this momentum at the Economic Club of New York in May, stating that foreign investment into Canada was running at twice the rate of its nearest G7 peer.
However, a closer examination reveals that this surge is predominantly driven by American investors acquiring Canadian companies through mergers and acquisitions (M&A). In 2025, U.S. investors accounted for more than half of Canada's $96.8 billion in FDI inflows. This represents a significant reversal of the past 20-year trend, where the U.S. share averaged roughly 26 percent. For the first six months of 2026, total FDI into Canada stood at $44.7 billion, with more than two-thirds originating from the United States.
The composition of this investment has raised concerns about economic sovereignty amid ongoing trade tensions. Mergers and acquisitions represented $43.6 billion, or nearly half, of the 2025 FDI total, compared to a historical average of around one-third. Experts argue that this mix lacks productivity-enhancing new investments. A study by the Council of Canadian Innovators found that 28 out of 30 acquired Canadian companies saw their senior decision-makers move abroad post-acquisition, potentially extracting intellectual property and talent from the country.
While portfolio investment in Canadian bonds has also increased significantly—reaching $110.2 billion in the second quarter of 2026, the highest level for any three-month period on record—this has primarily helped lower domestic borrowing costs rather than boost long-term productivity. The reliance on M&A over new capital formation means Canada's capital stock per worker remains approximately $125,000, ranking fourth lowest among 17 advanced economies, while the U.S. figure stands at $337,000.
In response, the Carney government is hosting a Canada Investment Summit aimed at attracting diverse global capital for long-term nation-building projects. The initiative seeks to reduce dependence on U.S. M&A activity and catalyze $1 trillion in investment over the next five years.