FidelityConnects: CUSMA countdown: What’s at stake for Canadian industrials, energy and equities

 

 

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Hello, and welcome to Fidelity Connects. I'm Pamela Ritchie.

 

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The CUSMA review is just one week away now and Canadian

 

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markets are at a potential turning point here.

 

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For Canadian industrials in particular this moment could reshape supply

 

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chains, autos, steel, aluminum while setting the stage for

 

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a new investment cycle.

 

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Our next guest says the base case is a renewal but with side

 

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deals, tighter enforcement and major implications for capital flows

 

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and domestic capacity.

 

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Where are the real risks in autos, tariffs, and could

 

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this unlock a new wave of foreign investment into Canada?

 

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Joining us here today to discuss all of this and more is equity research

 

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analyst, Robert Reynolds. During today's conversation we'll also be hearing

 

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from portfolio managers Joe Overdevest and Max Lemieux.

 

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Warm welcome to you, Bobby. Great to see you. How are you?

 

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I'm doing well, thanks, Pamela.

 

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Good. Have you got like the clock set?

 

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We've got the week out here before this all begins.

 

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I think everybody's prepped us to not think that the July 1st

 

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deadline is a hard deadline and that it's probably going to go beyond that for

 

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the CUSMA review.

 

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I wonder if you can help us go across everything from autos,

 

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the ports, the rails, everything that comes into an energy infrastructure and

 

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the companies that build it to what this moment is.

 

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We've had a year of rattling about tariffs, about whether

 

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trade deals will or won't be renewed.

 

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The global approach to trade has changed.

 

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In Canada, for industrials, what is this moment?

 

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I take you back to sort of February through April

 

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of '25 when there was a real fear in the market that

 

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Canada would face across the board tariffs from the US and that the Trump

 

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administration was going to throw out the CUSMA agreement.

 

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What we've learned since then is they've, by and large, kept all

 

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of the agreement in place and overridden pieces of it using the

 

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Section 232 and now Section 301 tariffs to

 

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target specific sectors like autos, forestry, steel and aluminum.

 

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The Canadian economy has not seen that much of a trade impact

 

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so far. The uncertainty of the review has likely hampered

 

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some business investment decisions in Canada but the

 

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actual economic impact from this trade uncertainty has

 

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not been that material thus far.

 

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The review, I'm actually optimistic that it results in

 

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a lifting of some of that uncertainty and businesses can proceed with

 

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some of their investment decisions and maybe see a little bit of growth pick up

 

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in the Canadian economy as a result.

 

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One of the narratives that we hear often is that the United States and other

 

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countries around the world but certainly in terms of our trade, the United

 

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State would like to bring all industries inside the borders of the US and

 

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therefore the cooperation on either side of the border

 

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for industries is less.

 

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What we're also hearing in Canada is that our government, along with, we think,

 

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allied investors want to invest in Canada, things

 

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being built here and across the industrial/materials

 

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sectors. Which is true?

 

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It's interesting you bring that up.

 

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The White House just released a resiliency strategy

 

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today which talks about making the US economy

 

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and the nation more resilient to threats.

 

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There is definitely an on-shoring push in strategically

 

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important industries for national defence.

 

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I think the US administration also realizes they can't make, or probably

 

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shouldn't make, everything that their country consumes because of the

 

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comparative advantage that various countries have in their cost base or

 

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access to labour, access resources.

 

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In Canada we have those access to resources that the US doesn't.

 

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We have somewhat of a comparative advantage on labour.

 

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The Trump administration would like to bring more of the

 

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auto jobs to the US but, interestingly, our auto sector's far

 

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more reliant on auto parts than auto assembly.

 

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The auto parts have been carved out in the USMCA review because the Canadian

 

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parts plants are very important to the US assembly plants in order to get the

 

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finished product done.

 

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I think the US, and this is the art of the deal, you start by asking

 

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for the moon and you're willing to settle for something

 

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less than that that definitely makes the US happy but is probably not as

 

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bad as what the initial headlines would suggest for a country like Canada.

 

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You are taking a look at analyzing countries across the space that

 

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you are an analyst for. What are companies saying, grappling with?

 

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I think we knew what types of uncertainty they were grappling with last year.

 

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Again, there's a little bit of a shock that rippled through the system and

 

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then, actually, some very good method

 

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in tracking tariffs, how to price those into one stock, what

 

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levels of tariffs could be passed on to consumers, for instance, to customers

 

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and so on. There's been some real prep, in a way, for this trade deal based

 

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on tariffs.

 

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There's been a lot of prep in the corporate community.

 

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There's been a lot a prep in analyst community like myself

 

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to understand how specific companies are addressing the

 

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trade uncertainty. I think the important thing is to try to avoid the landmines

 

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because there have been certain cases in the market where a company's

 

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product is specifically targeted by some of

 

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the US administration's tariffs.

 

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By and large, the companies that people thought would maybe get

 

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targeted but haven't been for various reasons, I almost feel like

 

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those management teams have moved on to focus on more

 

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micro strategic decisions for their business because the

 

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trade situation is sort of out of their hands.

 

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Almost every company we speak to isn't going to set up a facility

 

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in the US just because of tariffs because in a few

 

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years potentially the landscape changes and It's

 

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just very difficult to get a return on investment on those sorts of decisions.

 

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Again, a week out, we're gonna hear from head of research, also portfolio

 

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manager, Joe Overdevest right now.

 

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We asked him for his thoughts on CUSMA, where it's going,

 

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levels of optimism and so on.

 

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We'll both listen to what he has to say.

 

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For CUSMA a best case outcome would be probably not renewing

 

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it because the US government has already said they wouldn't like to renew it.

 

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The key fact for the audience is that if you actually want to tear up the

 

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agreement or terminate it the US president needs to actually go to Congress to

 

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get ratified, which is probably unlikely at this point in time.

 

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A great outcome would be potentially keeping

 

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the agreement, which if you don't do anything this continues for another 10

 

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years, and have side agreements.

 

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That would actually not involve tearing up or changing the actual agreement

 

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but doing side agreements. US with Canada, the US could be with

 

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Mexico, and even Canada with Mexico.

 

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All would be a great outcome potentially, in particular, lowering Section

 

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232 and also clarification that

 

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Section 301 tariffs would not come to our Canadian goods.

 

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When it comes to actual market risks, with Section 231 in particular, it's our

 

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manufacturing and auto jobs.

 

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When it comes to that is that it'd be great if we could just lower it to a more

 

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manageable level. Section 301 is more nuanced and more of

 

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a risk that's not known at this point in time.

 

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That's a tariff would involve forced labour.

 

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The reason why that's more of risk is that you could potentially bring in one

 

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part into our manufacturing process coming from a country that the US deems

 

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using forced labour, they could put a tariff on the final product price,

 

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not just the actual part you're using.

 

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It'd be very disruptive to our supply chain, in particular, for our supply of

 

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manufactured goods into the US.

 

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The 301s are not on place right now for Canadian goods but they

 

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are a risk that's been brought up by the US government.

 

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With any negotiation right now it's what parties would like to get from this.

 

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Here's an example where our natural resources may come to benefit.

 

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We have many resources the US government would like to have, in particular,

 

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other governments around the world, which would be oil, natural gas, uranium,

 

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potash, copper, critical minerals.

 

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Potentially we could do a pipeline dedicated to the US.

 

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We could potentially do an offer where we are

 

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not developing certain mines for critical minerals right now maybe because

 

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they're too costly. If the US government wants to give us funding that is

 

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very attractive that lowers the cost of capital for our companies to develop

 

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which would then add jobs to Canada, add tax revenue to Canada, that

 

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may be something we would trade for maybe making sure sectoral

 

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tariffs or 232s are lowered to protect our auto jobs and our

 

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manufacturing jobs throughout Canada.

 

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CUSMA itself depends on the actual fund.

 

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I'll give you an example. Fidelity Global Natural Resources is generally not a

 

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major risk at this point in time because most of the tariffs that the US

 

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government has imposed or threatened in the past have excluded natural

 

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resources. It's one of their sensitivities they've shown in past negotiations.

 

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Now, when it comes to Canadian funds it is more sensitive in that the risk is

 

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that section 232s, so our sectoral tariffs could increase, could go

 

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on other areas of our goods, that would be negative, or

 

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301s get added which would be also a negative for our Canadian

 

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economy in general, in particular, manufacturing.

 

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The opportunities are, of course, if in negotiations we can lower

 

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the sectoral tariff, or 232, that would be very beneficial for some of

 

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our companies.

 

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That's Joe Overdevest sort of parsing out what he thinks from an investment

 

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perspective. Bobby, let's pick up on a couple of pieces of things that he said

 

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there. First of all, let's just go to the 301s, the slightly nebulous

 

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nature of them. What does the US want, actually?

 

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It's worth explaining what the 301 is.

 

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It's a statute that was set in the 1970s that allows the

 

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US to investigate unfair trade practices and apply a tariff on

 

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foreign countries if those unfair trade practices are found.

 

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What Joe was referring to was a little over a month ago the

 

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US, or two months ago, in April, the US released a Section

 

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301 tariff on forced labour and listed a number

 

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of countries, including Canada, that would face either 12.5% or 15%

 

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tariff rate on all of their imports in the US on the basis that

 

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we were allowing goods with forced labour into our economies that--

 

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Somewhere in the supply chain.

 

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--then could get re-exported to the US.

 

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Exactly. What that release also stated was that all CUSMA or

 

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USMCA compliant goods are exempt from this 301 tariff.

 

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That's why there was no panic in Canada because--

 

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--over 90% of our goods are CUSMA compliant.

 

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But what do they want?

 

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I think they want to replace the revenues that they were getting from the

 

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reciprocal tariffs that were put in place in April of 2025

 

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and then subsequently deemed illegal by the Supreme Court

 

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in February '26.

 

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The 301 is a more legally sound basis for the US

 

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to put those tariff walls back up.

 

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Okay, interesting. A couple of other things that Joe was talking about there

 

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is money, capital coming in to build

 

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mines, these would be Canadian corporations but with capital from

 

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foreign direct investment coming perhaps from the US, could be used within

 

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trade for what? Take us there and what companies could use this

 

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for, for instance.

 

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I would argue this is something that we would want to happen without

 

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this trade deal but it just so happens that it's a great

 

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negotiating chip to say  we'll put this tungsten mine, as

 

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an example, on our major projects list so that it gets the two-year

 

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permitting review instead of five or six years.

 

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You as the US need tungsten because you're getting it all

 

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from China right now and it goes into all of your ammunition, so let's fast

 

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track this Canadian mine that can produce it.

 

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It's bargaining chips like that, or the US Department

 

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of Defence might actually invest directly in that Canadian stock or

 

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in that Canadian project.

 

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That's something that, arguably, the mining sector would encourage anyways

 

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because it increases the certainty of the mine being built and

 

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the funding being there to build it.

 

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I think there's a number of examples like that across the natural resources

 

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sector. Oil is, obviously, a big one in terms of does

 

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the US want us to try to export more to the US and

 

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more to their refining complex so that then diesel

 

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and gas and jet fuel can be re-exported to the rest of the world.

 

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Maybe that's another bargaining chip that we have, if we agree to maybe take

 

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more of the reins off from the environmental perspective on our oil

 

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sands and energy sector. I think these are things that the US

 

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administration would look favourably on.

 

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How does it help areas across the universe that you cover?

 

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You've seen it in the market already.

 

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The Canadian CapEx cycle plays in

 

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industrials have been leading the sector from a

 

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performance perspective. It's because of this CapEx

 

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circle in resources in Canada and in government spending and

 

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defence spending that the market can see coming.

 

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It takes a while for it to show up in the numbers but

 

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all of the commentary from the companies that we meet with and

 

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own in many of the portfolios is quite bullish on this theme.

 

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I think that that actually bodes very well for the overall Canadian economy

 

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doing better than maybe what some of the economists think if you look

 

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out a couple of years from now.

 

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Okay, it's really interesting.

 

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I mean, there is some complexity when you think of different levels

 

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of tariffs for ... I mean, there's already different levels of tariffs but

 

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CUSMA has, of course, put most of it under an umbrella.

 

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The question of whether that stays or goes or there's more side deals, I mean,

 

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it sounds incredibly complex in that you need a whole lot of extra levels of

 

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compliance to make sure it works.

 

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What's the bright spot in this?

 

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I think Joe in his comments said the base case is that the US is not gonna

 

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renew the deal. I would just clarify that renewal meant a 16-year

 

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renewal with no annual reviews of CUSMA.

 

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What non-renewal means, the deal continues for 10 years with

 

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annual reviews.

 

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Companies will have to contend with that uncertainty of

 

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an annual review of CUSMA going forward.

 

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I think that plus side deals is probably

 

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enough to create a little bit more comfort that the US isn't looking

 

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to rip up the CUSMA agreement.

 

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Compliance costs are real. Customs brokerage businesses are printing

 

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money right now because generally companies will outsource this to experts

 

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rather than add a lot of internal personnel to deal with that

 

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logistics and paperwork challenge.

 

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It's something that I think businesses are ...

 

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some are having to make strategic decisions around it but most are

 

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going forward assuming that the framework that exists today is what

 

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continues to persist in the future.

 

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That's great. Okay, let's hear what Max had to say.

 

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We spoke to him on Monday about some of his thoughts as we approach this

 

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deadline. This is Max Lemieux.

 

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When we look at the big picture I think we should keep in mind that

 

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what will be the drivers, I think, in

 

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this negotiation. I think the Americans have in mind this

 

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huge reserve that we do have.

 

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They don't seem to care about very much else but

 

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I think that it should be front and centre, if they want to continue on that

 

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journey of winning back their market share

 

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that were lost to China over the past 25 years.

 

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This is like, I think, a huge strategic point that

 

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Canadians have.

 

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Remember also that the US midterms elections are coming up very soon.

 

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It's in November.

 

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We know at what pace the Trump administration is trying to

 

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resolve what's going on in the Middle East.

 

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Clearly, I think that they are aware that they have to

 

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contain the inflation that is currently hitting most

 

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Americans' households as we speak.

 

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They just have a couple of months.

 

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I think, yes, Canada has to be very astute in their negotiation.

 

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I'm sure we'll have to give up different things here to

 

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please the Americans but I think we have a wild card that is

 

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very well suited in this long term reshoring

 

17:16.502 --> 17:18.937

expansion from the US.

 

17:18.937 --> 17:23.042

I think Canada is so well endowed and it's a question of

 

17:23.042 --> 17:24.910

taking advantage of this.

 

17:24.910 --> 17:28.981

To me, I would not say it's a no-brainer

 

17:28.981 --> 17:31.116

but it's key advantage.

 

17:31.116 --> 17:34.386

It's just a foundation of how economies are built.

 

17:34.386 --> 17:38.590

It's all about energy. That's why I feel like, again,

 

17:38.590 --> 17:42.895

I don't know how this will evolve over the next few weeks, few months

 

17:42.895 --> 17:46.932

but unlike the multiple ceasefires that we've seen in the Middle East I

 

17:46.932 --> 17:50.936

think the Americans this time might also have

 

17:50.936 --> 17:55.107

an incentive to

 

17:55.107 --> 17:58.777

get this done sooner rather than later in order to control inflation.

 

17:58.777 --> 18:02.815

There's a lot of easy things that I think could get done and help

 

18:02.815 --> 18:05.217

Mr. Trump.

 

18:05.217 --> 18:08.687

I think that at the end of the day life will go on.

 

18:08.687 --> 18:12.658

I want our unitholders to remember

 

18:12.691 --> 18:16.728

that, first of all, CUSMA covers only

 

18:16.728 --> 18:20.365

manufacturing. It's manufactured goods, right?

 

18:20.365 --> 18:23.502

It's not even 10% of the TSX.

 

18:23.502 --> 18:28.140

The reality is that our funds are very well diversified.

 

18:28.140 --> 18:33.011

We've been mindful about this current air pocket that

 

18:33.011 --> 18:35.581

has been going on for the past couple of months.

 

18:35.581 --> 18:37.783

Unemployment is almost at 7% in Canada.

 

18:37.783 --> 18:43.088

There's a lot of small, mid-size companies are feeling the pain of

 

18:43.088 --> 18:47.860

these extra tariffs that were put on steel, aluminum, et cetera.

 

18:47.860 --> 18:52.464

I think that we can be hopeful that there's

 

18:52.464 --> 18:56.568

light at the end of this tunnel and that this tunnel might not be

 

18:56.568 --> 18:58.237

a full year.

 

18:58.237 --> 19:01.340

That's good to hear from Max Lemieux. I'm glad to hear that.

 

19:01.340 --> 19:05.711

He mentioned, Bobby, inflation a couple of times there, everyone's

 

19:05.711 --> 19:09.448

reality of trying to grapple with some inflation that's circulating.

 

19:09.448 --> 19:13.519

Oil may have sparked it but the whole reshoring initiatives around the

 

19:13.519 --> 19:17.389

world have also sparked that. What can Canada offer to help get inflation down?

 

19:17.389 --> 19:21.793

Oil, basically.

 

19:21.793 --> 19:25.898

Oil, again, it comes back to the point is why would the US slap

 

19:25.898 --> 19:29.568

an across the board tariff on one of its larger trading partners which would be

 

19:29.568 --> 19:33.572

inflationary for its consumer when they've already had an opportunity to

 

19:33.572 --> 19:38.076

do so over the last year plus since they started down this path of

 

19:38.076 --> 19:40.279

a tariff regime.

 

19:40.279 --> 19:44.349

Oil, it's agricultural products, there's a number

 

19:44.349 --> 19:47.719

of areas where we can help the US in that story.

 

19:47.719 --> 19:52.090

I think you've mentioned before that Canada has sort of the

 

19:52.090 --> 19:55.861

deepest capital markets for resources, very well established market for this.

 

19:55.861 --> 19:58.430

It kind of ties back to what we were saying at the beginning.

 

19:58.430 --> 20:01.967

This is a place where capital wants to arrive and believes it will be put to

 

20:01.967 --> 20:04.169

work effectively.

 

20:04.169 --> 20:08.240

Again, in the industrial buildout of AI, which

 

20:08.240 --> 20:12.344

for Canada is the data centres but it's also all the types of energy

 

20:12.344 --> 20:15.847

that goes into it and the building of such things and where they're going to

 

20:15.847 --> 20:19.952

go, just sort of place the AI story here

 

20:19.952 --> 20:23.956

for us for a second and what's building it out across

 

20:23.956 --> 20:25.290

your industries.

 

20:25.290 --> 20:29.394

The AI story is definitely impacting the Canadian capital

 

20:29.394 --> 20:33.065

markets. It's much narrower than it is in the United States.

 

20:33.065 --> 20:37.102

I mean, we have maybe one company that plays in the semiconductor space

 

20:37.102 --> 20:41.773

in tech. In the industrial space it's impacting nuclear

 

20:41.773 --> 20:45.811

plays. You'll see Canada just released a new nuclear industrial policy

 

20:45.811 --> 20:49.848

this week aiming to make CANDU appropriate

 

20:49.848 --> 20:55.220

for export again around the world and seemingly favouring the CANDU technology

 

20:55.220 --> 20:58.690

within Canada, which, of course, is owned by one of the Canadian engineering

 

20:58.690 --> 21:01.793

firms, or controlled by it.

 

21:01.793 --> 21:06.031

You see it on the mining, again, of copper and

 

21:06.031 --> 21:10.068

how that plays into the suppliers, the picks and shovels to

 

21:10.068 --> 21:14.239

those miners because you need copper to go in all the electrical wiring

 

21:14.239 --> 21:17.709

that is going to our grid buildout.

 

21:17.709 --> 21:21.380

There are a number of derivative ways to play AI.

 

21:21.380 --> 21:25.450

I would say AI in general is also just creating a more buoyant capital

 

21:25.450 --> 21:29.354

markets which flows into our financial sector which have large wealth

 

21:29.354 --> 21:33.125

management and capital markets businesses that have certainly benefited

 

21:33.125 --> 21:37.296

indirectly from the AI trade even though they're not directly tied

 

21:37.296 --> 21:38.764

to AI per se.

 

21:38.764 --> 21:42.801

And have had some regulations recently lifted to

 

21:42.801 --> 21:45.637

help them land into this environment.

 

21:45.637 --> 21:49.808

That's correct. The Ontario banking regulator, OSFI, on Friday

 

21:49.808 --> 21:54.413

announced that the amount of capital that Canadian banks will need to hold will

 

21:54.413 --> 21:56.648

fall from 11.5% to 11%.

 

21:56.648 --> 22:00.852

Their stated reason for reducing that

 

22:00.852 --> 22:05.157

capital requirement is the sector is very well capitalized with

 

22:05.157 --> 22:09.928

low risk and they want to encourage more lending to

 

22:09.928 --> 22:15.500

specific Canadian growth sectors like infrastructure and defence.

 

22:15.500 --> 22:19.438

And the cross use of both as well, it seems, to be making the case for

 

22:19.438 --> 22:19.805

it.

 

22:19.805 --> 22:22.107

Exactly. One of the interesting things is the banks were not capital

 

22:22.107 --> 22:26.278

constrained prior to OSFI changing the rules, it was more an issue of

 

22:26.278 --> 22:30.449

demand for those loans wasn't there. It's potentially

 

22:30.449 --> 22:34.419

positive for the sector over the next couple years if we do see

 

22:34.419 --> 22:38.457

the loan demand pick up because the banks will then be able to lend into

 

22:38.457 --> 22:43.028

that without having to increase capital by as much as they otherwise would.

 

22:43.028 --> 22:47.199

That takes us a little bit to they will increase loans if there's demand there

 

22:47.199 --> 22:48.700

if things like permitting--

 

22:48.700 --> 22:50.035

That's right.

 

22:50.035 --> 22:54.539

--are easier for companies all across the industrial spectrum to get access

 

22:54.539 --> 22:58.677

because, in fact, they can put some shovels in the ground, or whatever they

 

22:58.677 --> 23:02.147

need to do to get rolling. Tell us about permitting.

 

23:02.147 --> 23:06.551

We passed Bill C-5 in Canada in 2025 that included

 

23:06.551 --> 23:10.689

the creation of the Major Projects Office and the ability to designate

 

23:10.689 --> 23:14.926

a project in the national interest and effectively curtail

 

23:14.926 --> 23:19.564

a lot of the environmental and Indigenous consultation

 

23:19.564 --> 23:23.668

processes that were otherwise enshrined by law and created

 

23:23.668 --> 23:27.305

a five-year plus permitting timeline.

 

23:27.305 --> 23:31.510

There's under 20 major projects designated in Canada today.

 

23:31.510 --> 23:34.946

There's dozens more that the government has said could make it on the list if

 

23:34.946 --> 23:36.782

they advance to a further stage.

 

23:36.782 --> 23:41.052

I think what capital providers would like to see is a more across

 

23:41.052 --> 23:45.056

the board reform on permitting. It shouldn't take us five years for the

 

23:45.056 --> 23:48.026

non-national interest projects.

 

23:48.026 --> 23:52.697

There's also the question of Indigenous rights and how the laws actually

 

23:52.697 --> 23:56.835

create a lot of uncertainty for large projects, in particular in British

 

23:56.835 --> 24:00.806

Columbia, just surround who owns what, who has title to the

 

24:00.806 --> 24:05.010

land. This is a major stumbling block for large corporations that

 

24:05.010 --> 24:06.878

wanna put billions into the ground.

 

24:06.878 --> 24:12.050

I mean, it has been successful to simply allow

 

24:12.050 --> 24:15.754

Indigenous groups to own part of the project.

 

24:15.754 --> 24:18.824

I mean, it seems to make money for everyone it usually works.

 

24:18.824 --> 24:20.125

It helps.

 

24:20.125 --> 24:24.196

That is a good point. That's one of the avenues for success for a lot

 

24:24.196 --> 24:27.666

of these projects, you need to give the Indigenous groups a stake at the table.

 

24:27.666 --> 24:31.703

Yeah, it tends to make things move faster on the whole.

 

24:31.703 --> 24:35.674

With some permitting perhaps coming and the amount of time

 

24:35.674 --> 24:39.711

it takes collapsing things like more pipelines

 

24:39.711 --> 24:42.280

could be built.

 

24:42.280 --> 24:46.218

I was just looking at the rails story, the corridors that are being

 

24:46.218 --> 24:48.987

proposed. It all seems a little bit out there.

 

24:48.987 --> 24:53.058

We don't know if it's all gonna come together. There is some willingness,

 

24:53.058 --> 24:56.561

would you not say, from sort of the industrial side of things now.

 

24:56.561 --> 25:00.699

It seems like people are more willing to let projects get through, voters

 

25:00.699 --> 25:02.634

allowing projects to get through.

 

25:02.634 --> 25:06.371

That's correct. I mean, what does Canada want to do?

 

25:06.371 --> 25:10.742

We want to safeguard our trading relationship with the US but over

 

25:10.742 --> 25:14.713

the long term diversify away from the US as a trading

 

25:14.713 --> 25:18.116

partner. What do we have to export to the rest of the world?

 

25:18.116 --> 25:22.220

It's energy, agricultural products, maybe

 

25:22.220 --> 25:26.391

some advanced manufacturing things like nuclear facilities, and

 

25:26.391 --> 25:30.562

a few other things. It's really energy and ag are the two big buckets.

 

25:30.562 --> 25:34.699

The rails are going to be the transportation of those goods

 

25:34.699 --> 25:34.933

for export.

 

25:34.933 --> 25:37.168

To the ports which also need to be...

 

25:37.168 --> 25:40.338

We're expanding the Port of Prince Rupert in northern B.C.

 

25:40.338 --> 25:43.608

We're talking about building a new port in Churchill, Manitoba.

 

25:43.608 --> 25:46.645

Those are both rail serve ports.

 

25:46.645 --> 25:50.682

If Canada is successful, diversifies its relationship, it should be

 

25:50.682 --> 25:54.486

a nice volume growth tailwind for the Canadian rails if you look out over the

 

25:54.486 --> 25:58.189

medium term and thus an earnings growth tailwind.

 

25:58.189 --> 26:01.426

One of the discussions in headless right now is on the defence front.

 

26:01.426 --> 26:06.131

Does Canada buy submarines from Germany or from Korea?

 

26:06.131 --> 26:09.601

There's lots of discussions there. What's really extra interesting is all the

 

26:09.601 --> 26:12.137

sweeteners that seem to be included in this.

 

26:12.137 --> 26:16.074

Will there be new types of joint ventures where Canada owns 51% or

 

26:16.074 --> 26:20.946

more of sort of the business and its ability to be located here.

 

26:20.946 --> 26:25.317

What are some of the extra sweeteners interesting to you covering industrials?

 

26:25.317 --> 26:27.319

What could get built?

 

26:27.319 --> 26:31.289

The biggest needle movers look like potentially commitments

 

26:31.289 --> 26:35.293

to buy from our space companies, satellites

 

26:35.293 --> 26:39.698

or other communications equipment

 

26:39.698 --> 26:40.865

which are made in Canada.

 

26:40.865 --> 26:43.735

So sell us a submarine but also buy...

 

26:43.735 --> 26:46.838

That's right. I mean, that would be one component of the benefits package

 

26:46.838 --> 26:50.742

because these are over a hundred billion dollar procurements over multiple

 

26:50.742 --> 26:54.813

decades. Others would be let's build defence vehicles

 

26:54.813 --> 26:56.815

in Canada in a joint venture.

 

26:56.815 --> 27:00.819

Maybe our auto parts suppliers can pivot and start to produce more

 

27:00.819 --> 27:02.821

for the defence industry.

 

27:02.821 --> 27:06.891

It's interesting on the auto point, one of the other pivots that's happening is

 

27:06.891 --> 27:11.096

automakers pivoting and say, hey, all these investments that we made in battery

 

27:11.096 --> 27:14.766

facilities for electric vehicles that we can't sell, maybe we could repurpose

 

27:14.766 --> 27:19.237

those and build backup storage batteries for data centres, because everybody's

 

27:19.237 --> 27:23.408

investing in data centres. That's actually an interesting earnings growth

 

27:23.408 --> 27:27.512

angle for a number of automotive companies and auto suppliers that the

 

27:27.512 --> 27:29.414

market's starting to appreciate a little more.

 

27:29.414 --> 27:33.251

There's some true creativity in there and innovation as well.

 

27:33.251 --> 27:37.355

How would you, to an extent, sum up this capital

 

27:37.355 --> 27:43.828

waiting at the doorsteps moment, I mean, if it is, and what

 

27:43.828 --> 27:48.667

beyond the trade deal you'd like to see for the industrials?

 

27:48.667 --> 27:52.704

I'd say the further permitting reform, clarity on

 

27:52.704 --> 27:56.741

our Indigenous relations as it relates to things going through the court

 

27:56.741 --> 28:00.845

system, and then just getting more of these projects off the ground,

 

28:00.845 --> 28:04.949

which I believe the first two items are preconditions

 

28:04.949 --> 28:09.220

for. The fourth I would say is commodity prices do need to

 

28:09.220 --> 28:14.259

remain in a supportive environment to incent this greenfield production.

 

28:14.259 --> 28:18.263

Currently, they are and there's reasons to believe they could stay

 

28:18.263 --> 28:22.400

at those levels because the world does need more of these physical goods.

 

28:22.400 --> 28:26.104

Okay. It's so fascinating to check in with you at this moment, to hear from

 

28:26.104 --> 28:29.107

portfolio managers. Bobby Reynolds, thanks for joining us here today in the

 

28:29.107 --> 28:29.507

seat.

 

28:29.507 --> 28:30.008

Thank you.

 

28:30.008 --> 28:33.945

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