Machinery Sector Minimally Impacted by US-Canada Tariffs, Freedom Broker Predicts

Freedom Broker analysts have downplayed the impact of recent US and Canadian tariffs on the machinery sector, stating that most companies will be able to absorb or pass on additional costs. The new tariffs, which range from 15% to 50%, affect various goods such as cement, industrial equipment, turbochargers, electrical components, plastics, and chemical products.

The analysts note that Canadian suppliers face more risks due to their heavy dependence on trade with the US. In 2025, Canada accounted for less than 5% of US imports under the additional tariffs, while about 80% of Canadian exports went to the US.

Despite this, Freedom Broker maintains a 'Buy' rating for several companies in the sector, including Caterpillar (CAT), Cummins (CMI), and Power Solutions International (PSIX). These companies have minimal exposure to the tariffs due to their production capabilities, supplier diversification, or ability to raise selling prices.

However, some companies may experience a decline in gross margin, with Astec Industries (ASTE) potentially seeing a 0.4 percentage point decrease. Deere & Company (DE), PACCAR (PCAR), DNOW (DNOW), DXP Enterprises (DXPE), Gorman-Rupp (GRC), and Gencor Industries (GENC) have been assigned a 'Hold' rating due to their varying levels of exposure to the tariffs.