Canada Tightens Foreign Investment Rules in Response to Global Trade Shifts

The Canadian federal government has announced updates to its national guidelines concerning foreign investments in domestic companies, a shift prompted by the rapidly evolving global trade landscape, according to Innovation Minister François-Philippe Champagne.

These updated regulations, which apply to all foreign investments, are seen as a direct response to the changing international trade environment. Omar Wakil, partner and co-chair of Torys’ Competition and Foreign Investment Review practice, suggested in an interview with The Globe and Mail that the government’s decision was significantly influenced by the U.S. tariff situation. Wakil stated, “It is a warning to U.S. investors,” further emphasizing that the move is part of the Canadian government’s strategy to address potential economic vulnerabilities arising from U.S. trade policies.

Wakil elaborated that the government’s message is clear: “If U.S. businesses are trying to exploit weaknesses created by tariffs by purchasing Canadian companies at reduced values, we might take action.” This shift in policy marks an important change, with the government explicitly broadening the scope of national security concerns to include economic security. This, Wakil noted, signals a broader, more comprehensive approach to managing foreign investments in Canada.

According to Wakil, this policy revision is likely to have a significant impact on mergers and acquisitions (M&A) activity within Canada. Any transaction involving a non-Canadian investor could face heightened scrutiny, regardless of the size or sector. “There aren’t any thresholds,” Wakil explained, underscoring that the government is prepared to review any potential investment, sending a clear signal that no deal is too small to escape review.

This policy shift reflects a broader trend in Canada’s foreign investment strategy, which has become more restrictive in recent years. As Canada aligns with other Western nations in response to global geopolitical shifts—particularly the growing influence of China in sectors like the critical minerals supply chain—Wakil suggested that the government’s move represents a continuation of a tightening approach.

“The government has clearly adopted a more restrictive policy toward critical minerals over the past several years, creating some uncertainty for investors in that sector,” he remarked. Now, with the updated guidelines, this cautious stance is being extended to all foreign investments, sending a pointed message, especially to American investors.

Per a statement from the government, these changes underscore Canada’s commitment to safeguarding both its economic and national security interests, reinforcing the nation’s approach to foreign investments as it navigates an increasingly complex global economic landscape.

Source: Torys