Foreign money is flooding into Canada. But a closer look reveals a U.S.-driven boom

When Prime Minister Mark Carney spoke to a room of Wall Street heavyweights in May, he boasted about the cash flooding into Canada.

“Foreign investment is running at twice the rate of our nearest G7 peer,” he told the Economic Club of New York event.

There is, in fact, plenty of money pouring in. Foreign direct investment into Canada reached nearly $100-billion last year, the highest level of FDI since 2007. And global investors are keen to snap up Canadian-issued bonds at lower yields than comparable debt in other rich countries – an indication that Canada is a safe destination to park investment dollars.

But a closer look shows that the foreign investment boom is largely being driven by Americans acquiring Canadian companies – a fraught outcome during a bruising trade war with the Donald Trump administration, where sovereignty is top of mind.

As Canada seeks to wean itself off its economic dependence on the U.S., the fact that the surge in FDI dollars is mostly coming from south of the border raises the stakes for Mr. Carney’s inaugural Canada Investment Summit on Monday.

At the summit, the largest gathering of global financial leaders to ever assemble in this country, the Prime Minister will be pitching Canada as an attractive location for foreign capital. It is part of Ottawa’s efforts to “catalyze” $1-trillion in investment over the next five years and embark on a multitude of nation-building projects.

Attracting investments from beyond our nearest neighbour will be a key objective of the Carney government next week, as money managers from Singapore to London arrive in Toronto. They will be asked to fund projects that could take decades to pay off – but if they do, those investments could benefit Canada’s economy far more than the short-term acquisitions that have dominated the latest FDI trend.

“Before celebrating the recent upturn, it is worth reminding that there are a variety of types of FDI, and some are, frankly, more positive than others for the long-term health of the Canadian economy,” Bank of Montreal chief economist Doug Porter wrote in an Aug. 28 report.

Mergers and acquisitions, profits retained in Canada by foreign firms and new investments such as building a factory make up the three main components of FDI. M&A is considered “the most controversial,” Mr. Porter said, as it is “bluntly, not always a net overall positive for the economy.”

“It’s thus, arguably, somewhat unfortunate – or at least less encouraging – that the bulk of the upturn seen in FDI since the start of 2025 has been driven by M&A activity, followed by retained earnings, with new investments a distant third.”

For the first six months of 2026, FDI into Canada totalled $44.7-billion. More than two-thirds of that money came from the U.S.

There has been very little FDI coming from beyond the U.S. for the better part of the last 12 months, Toronto-Dominion Bank economist Maria Solovieva said in an interview. “It’s mostly [the] U.S. coming back.”

Tiago Figueiredo, a macro strategist at Desjardins, wrote that the “degree of concentration is unusual” in an Aug. 27 report.

The surge in the U.S. share of FDI into Canada represents a swift reversal of the longer-term trend. Jordan Brennan, managing director of thought leadership at Royal Bank of Canada, said the U.S. share of Canada’s inbound FDI has been cut in half over the past 20 years and currently stands at an annual average of roughly 26 per cent.

In 2025, however, American investors accounted for more than half of Canada’s $96.8-billion in FDI inflows. And that proportion appears set to grow even larger in 2026.

M&A, meanwhile, represented $43.6-billion or nearly half of the 2025 total. The historical average, according to a recent C.D. Howe Institute report, is around one-third.

“We can take little comfort from the FDI flows that often simply reassign the ownership of existing assets,” the report said.

One component of FDI that is performing well is portfolio investment, which refers to foreigners buying up Canadian stocks and bonds. Portfolio investment has been remarkably strong in 2026 so far, though Mr. Porter’s report for BMO notes it is also far less sticky, and thus more volatile, than other FDI.

Fixed income investors have been especially interested in the Canadian market, with foreign buying of our bonds helping to keep domestic yields lower amid a broader fixed income sell-off, meaning Canadian governments and businesses can borrow money at lower interest rates relative to elsewhere. Mr. Porter said government of Canada yields are a full percentage point below comparable U.S. bonds.

One key economic measure that experts believe could benefit from a further boost in portfolio investment is capital stock per worker. Capital stock refers to business equipment such as machinery and tools. The idea is that the more capital stock available to each worker, the more they can produce over a set period of time.

Right now, Canada’s capital stock per worker is roughly $125,000, according to a joint analysis from Royal Bank of Canada and consulting giant McKinsey that was published on Sept. 8, putting the country fourth lowest among a group of 17 advanced economies.

For comparison, the analysis found U.S. capital stock per worker was $337,000. Even Australia’s was nearly double that of Canada at $240,000.

Canada has spent decades struggling to boost such productivity measures without success. Jim Balsillie, the former co-chief executive officer of BlackBerry Ltd. who now chairs the Council of Canadian Innovators, said part of the reason for those failures is that the government promotes all FDI without differentiating between foreigners buying physical assets and infrastructure, and acquisitions of more high-tech businesses that generate intellectual property.

“FDI in traditional sectors can be beneficial because it has positive spillovers such as new industrial facilities, jobs, local supply chains and a new tax base. But in the digital sphere it’s extractive – the talent, IP and data move seamlessly, and profits accrue where foreign headquarters are,” Mr. Balsillie said.

Last month, Mr. Balsillie’s CCI published a research study that was based on interviews with the founders of 30 Canadian companies that were acquired by foreign buyers. While a majority of the acquired companies – 19 out of 30 – maintained a large operational presence in Canada after being sold, their leadership largely decamped. Almost all – 28 out of 30 – saw their senior decision-makers move abroad post-acquisition.

“This often meant that engineering teams, product development and other operational functions remained in Canada, while decisions about how those capabilities were used were made elsewhere,” the study concluded.

In September, 2019, Mr. Balsillie wrote an op-ed urging policy-makers to distinguish between foreign portfolio investment, or FPI, and more traditional FDI. Seven years later, he is frustrated that Ottawa has ignored his warning.

“It was an exhortation to change,” Mr. Balsillie said, “but we haven’t.”

He cited the federal government’s willingness to accept private investments into Canadian airports as an example of outdated thinking on FDI.

“Selling airports to foreign investors really does nothing for our productivity,” Mr. Balsillie said. “We need to focus on innovative domestic companies that are already competing globally and chiselling into global value chains because that’s where the biggest returns are. Focusing only on privatizing airports and growing the resource sector is not enough.”

There are some potential benefits to selling federally owned airports, however, Canadian Imperial Bank of Commerce chief economist Avery Shenfeld argued in an Aug. 31 report.

“Changes in ownership can in some cases put assets into the hands of those who are better able to identify opportunities for additional investments,” Mr. Shenfeld said in his report.

Even if Ottawa has not adopted Mr. Balsillie’s advice to focus on foreign portfolio investment, foreign investors certainly have. During the second quarter of 2026, foreign investments in Canadian government and corporate bonds reached $110.2-billion, the highest level for any three-month period on record. While the vast majority of that total – $80.8-billion – were purchases of government bonds, the fact that Canadian companies are finding more global buyers of their debt helps keep their borrowing costs down, which in turn makes it easier for them to grow.

That is exactly the type of investment that the Canadian Global Growth Forum, a complimentary event to Mr. Carney’s summit being hosted by the Canadian Venture Capital and Private Equity Association, is aiming to attract.

“We’re bringing global institutional investors to Toronto to meet the fund managers who back Canada’s mid-market and growth companies, and the companies themselves,” said Ben Bergen, CEO of the CVCA, adding that more than half of the event’s attendees are coming from outside Canada and the U.S.

“Canada needs more partners and more sources of capital, not fewer, and the investors coming are exactly that. We’re pursuing the kind of investment where Canadians retain more ownership, companies expand into new markets, and the country builds lasting wealth and employment.”

It could also help raise Canada’s long-moribund economic productivity by increasing the supply of capital stock, such as manufacturing and computing resources, to raise the amount each worker can produce.

Bill Robson, president emeritus of the C.D. Howe Institute and co-author of its recent FDI report, said that the only period in Canadian history when Canada’s capital stock per worker was so consistently below its peers was during the 1930s. “That is a lousy precedent,” Mr. Robson said in an interview.

His report concluded that “the FDI headline is not really a harbinger of hope.”

Until the country can start bringing in more productivity-enhancing capital, the report said, “Canada’s investment crisis is deepening, whatever the FDI numbers have to say.”