What has been the reaction to Canada’s plans for nation-building infrastructure projects?
Sabahat Khan: This was probably the most topical issue for companies at the conference. There was a lot of excitement around the Build Canada initiatives.
At a very high level, these infrastructure initiatives are providing confidence to the market. That in turn is leading private enterprises to put their money on the line and start to commit to projects where they might otherwise have hesitated.
I think we'll start to see the effects of this later this year, and at a more pronounced level into 2027 and 2028.
James McGarragle: There's been a lot of noise in the market about whether policy commitments like these actually stick. Our view is that this one has real legs. Defence is emerging as a common and potentially durable tailwind across the aerospace names we cover.
NATO members have agreed to push defence spend to 5% of GDP by 2035. Canada has already earmarked $82 billion over the next five years, and the longer-term trajectory points to over $1 trillion in cumulative spend over the decade.
Policy architecture is starting to take shape, with the launch of the Defence Investment Agency to speed up procurement. Layer on top of that the government's ambition to source 70% of new military equipment domestically, up from around 30% today.
This supportive policy environment is converging with structural demand resilience. Fleet expansion and pilot retirements continue to drive training demand, and backlogs are healthy.
"Defence is emerging as a common and potentially durable tailwind across the aerospace names we cover."
James McGarragle, Canadian Industrials Analyst
How are companies handling the freight recession?
Walter Spracklin: We’ve seen signs of progress. In the freight pricing environment, tighter supply driven by regulatory changes has really stripped out most of the misbehaving carriers.
That's resulting in a significant lift in truck pricing, which in turn has had a positive impact on rail rates, since the two are competitive on many of the truck lanes. The war in Iran has also created some opportunities in air cargo capacity.
What impact are trade tariffs having?
Khan: Trade tariffs have been a wet blanket on sentiment across the North American industrials sector, with both first derivative and second derivative impacts playing through the market.
The first derivative impacts are the direct effects of tariff announcements on companies in the coverage universe, particularly around steel. Those impacts are playing through steel-exposed areas of the industrial space, including heavy equipment, HVAC, construction and broader heavy industrials.
For Canadian firms, tariffs are also affecting profitability more broadly. With prices expected to remain at current levels throughout the year, companies are looking to the NAFTA and CUSMA negotiations, as well as the broader tariff framework, for potential relief.
The second derivative impacts are tied to uncertainty. Large capital projects are being pushed out as asset owners and industrial manufacturers wait for clearer final tariff policy before launching projects or committing to a specific jurisdiction.
As negotiations move through the summer months, some level of reversal or greater clarity could lead to a more broadly improved backdrop for industrials heading into the second half of the year.
"Tariffs have been a bit of a wet blanket on sentiment across our coverage."
Sabahat Khan, North American Industrials Analyst
What is the situation in paper and forestry products?
Matthew McKellar: Demand across the space feels pretty tepid. We’re struggling with affordability issues in housing and a cautious consumer more generally. But there are some reasons for optimism.
Tariffs have hit the lumber group in particular. Canadian companies who put softwood lumber into the U.S. – which accounts for half of production – have gone from paying about 14% to more than 45% as a combined duty and tariff rate.
As one company put it at the conference, the supply response by the industry is reducing the level of equilibrium demand at which we'll see tight industry conditions. That has set us up for better conditions at lower levels of demand going forward.
"Canadian companies who put softwood lumber into the U.S. have gone from paying about 14% to more than 45% as a combined duty and tariff rate."
Matthew McKellar, Global Paper and Forest Products Analyst
What other themes emerged from the conference?
Spracklin: Many companies noted a growing role of AI driving operational efficiency, especially in the transportation sector. That’s based on the intricacies of product moves to deal with unexpected weather events. We see AI as significantly enhancing for the sector.
Capital allocation was an important theme for companies across sectors. We heard each of the management teams offer disciplined plans around capital allocation, balancing organic growth with strategic M&A and shareholder returns.
"We see AI as significantly enhancing for the transportation sector."
Walter Spracklin, Director of Canadian Research and Co-Head of Global Industrials Research
Walter Spracklin, Sabahat Khan, James McGarragle and Matthew McKellar authored the report "2026 RBC Capital Markets Canadian Industrials Conference - Complete Conference Review and Key Takeaways," published on May 22, 2026. For more information, please contact your RBC representative.
