By Bill Tremblay
While tariffs continue to generate complications for equipment manufacturers in Canada, new pathways to growth are emerging.
During a virtual roundtable, the Association of Equipment Manufacturers (AEM) outlined what 2026 may hold for the Canadian equipment industry and the challenges and opportunities its members will face.
“As we look forward to 2026, our industry is optimistic,” said Megan Tanel, President and CEO at AEM. “Despite being at a crossroads due to tariffs and supply chain vulnerabilities — pretty significant bumps — we’re also seeing some great opportunity.”
Canada’s 2026 budget is generating optimism for manufacturers. The federal budget policies, including expanded capital cost allowance and the $51 billion Build Communities Strong Fund, are expected to have a largely positive impact for manufacturers.
“Budget 2025 is a significant and welcome step forward, sending a strong signal that the government is serious about strengthening Canada’s industrial capacity and productivity,” Tanel said. “We have a chance to build more resilient domestic supply chains, to invest in large scale infrastructure that supports manufacturing competitiveness and prioritize a truly integrated domestic market that fortifies Canada’s long term economic security.”
Tariff impact
Various tariffs levied by the United States this year have created challenges for equipment manufacturers. Canadian companies exporting equipment to the United States may face tariffs. As well, components shipped into the U.S. that are destined for Canada may be charged with import tariffs.
For CMI Mulching, a Quebec-based manufacturer of tracked land clearing equipment, tariffs have also lowered the price on Canadian steel, which helps offset other increases.
“For steel producers in Canada, they’ve seen a large drop in demand from the U.S. market,” said Charles Vennat, President and CEO of CMI Mulching. “So, there’s been good availability for manufacturers in Canada, so that will help offset some of the tariffs of the U.S.-based components that we’ve seen.”
Overall, the new trade reality has led to a single digit percentage in cost increases. The CMI Mulching carriers are also exempt from U.S. tariffs, excluding individual parts.
However, tariffs have also generated turbulence in the form of market uncertainty.
“It’s had such a massive ripple effect just in terms of how we think, how we plan and people’s purchasing habits,” Vennat said. “The pipelines for future revenue and expected revenue for a lot of contractors is less clear down the road. So, I think that uncertainty has been the biggest killer, the unpredictability and the inability to plan because of the massive fluctuations in input costs.”
Tariff mitigation
Manufacturers are also now dedicating resources to tariff mitigation as they try to minimize price increases for their customers.
“We’ve always added tariffs as a line item for parts, just to be very clear we haven’t increased the price. This is what it is. The second they’re dropped, we won’t charge them on imports to the United States,” Vennat said.
Tariffs are also forcing global suppliers to change how they distribute their goods from country to country. Companies that once used the United States as a distribution point for markets like Canada are now rerouting their goods to avoid import tariffs.
Kubota Canada, for example, worked with its suppliers to change how it received certain components when Canada implemented counter tariffs on American imports.
Kubota arranged to have tire assemblies shipped in parts from different locations worldwide rather than receive the assembled unit from the United States.
“This enabled us to completely avoid getting that tariff impact, which was a win for us and ultimately a win for our customers,” said Yannick Montagano, President of Kubota Canada.
“That’s just a simple example but imagine doing that across your entire product line and supply chain — that’s what I think we are trying to do as equipment manufacturers.”
The Sept. 1 removal of Canada’s counter tariffs, which were as high as 25 per cent, is another win for manufacturers and buyers heading into 2026.
“At a certain time, we basically shut down all imports of those products that were affected by those counter tariffs and relied on the inventory already in the dealer channel to fulfill the needs of our customers,” Montagano said. “Had those counter tariffs remained in effect, it would create a significant challenge.”
Price impact
How tariffs will impact the cost of buying new equipment in 2026 will vary based on the country of origin.
At Kubota Canada, its machines are sourced worldwide, with inventory coming from Europe, Japan and the United States.
“Our customers can expect a higher cost from U.S. manufactured products than products manufactured elsewhere in the world,” Montagano said. “That’s just a reality of the U.S. trade policy.”
In preparation for tariffs, manufacturers also stockpiled inventory to offset price increases.
However, those inventory stockpiles will eventually be depleted.
“I think as we see that stockpiling run through, as we see the tariffs really start to infiltrate the cost base of the supply chains, I think you could see cost increases,” Vennat said.
“The question will be how long will those be tolerated before they are repealed?”
CUSMA review
In July 2026, the Canada-United States-Mexico Agreement (CUSMA) will see a mandatory joint assessment by its member countries. The assessment will evaluate the trade deal and determine its future.
As part of the public consultation process, AEM submitted comments to both the United States and Canada highlighting CUSMA’s (or USMCA in the United States) benefits to business in North America.
“We just really focused on the importance of having the free trade, and we emphasize the critical role that USMCA and CUSMA play in supporting North American economic security and competitiveness,” Tanel said.
“We were able to note that the agreement has driven a 50 per cent increase in regional trade since its implementation in 2020, and there’s a ton of concerns if this agreement would go away.”
