The Canadian economy in 2025 was shaped by a mix of cautious optimism and persistent volatility. Inflationary pressures eased compared to prior years, but confidence remained fragile as businesses navigated changing interest rate expectations, labour constraints, and uneven demand across sectors.
One notable source of uncertainty was the on-again, off-again nature of tariffs, particularly tied to global trade relationships and U.S. policy signals. For Canadian businesses — especially those tied to exports or cross-border supply chains — this created hesitation around long-term commitments and capital spending. Decisions were often delayed, re-evaluated, or structured more conservatively, reinforcing the importance of financial flexibility.
Industry Spotlights
Forestry: Regional Pressures and Ongoing Disputes
The forestry sector continued to face region-specific challenges throughout 2025. Differences in provincial regulations, stumpage costs, and market access meant that outcomes varied widely across the country.
- Stumpage fees and cost structures remained a significant pressure point in some provinces (primarily BC), impacting competitiveness.
- The ongoing Canada–U.S. softwood lumber dispute continued to create uncertainty around pricing, margins, and long-term planning.
- Forest fires once again disrupted operations, affecting harvest volumes, mill activity, and regional employment.
The Western Canadian forestry industry is in steep decline. The combination of high stumpage fees, the closing of mills, and the ongoing softwood lumber dispute and resulting tariffs has led to the migration of production to the US, and the shrinking of the industry in Canada.
Transportation: Oversupply and Structural Change
The transportation industry faced a challenging year as oversupply continued to weigh on the market. Excess capacity, supply chain issues because of tariffs, combined with softer demand in certain lanes, put sustained pressure on rates and margins.
One of the most talked about developments was the end of the Drivers Inc. model, which marked a significant shift in how some operators structured labour and compliance. This change forced businesses to reassess operating models, cost assumptions, and long-term sustainability.
In response, many fleets have prioritized:
- Fleet rationalization rather than expansion
- Equipment utilization and lifecycle management
- Greater scrutiny of capital investments and financing structures
Oil & Gas: Selective Growth and LNG Momentum
The Canadian energy sector demonstrated resilience in 2025, despite mixed signals from commodity markets and capital spending patterns. While drilling activity declined somewhat relative to earlier optimism, LNG export development and pipeline expansions have created strategic growth corridors for Canadian producers.
- LNG expansion projects continued to generate optimism, particularly for natural gas producers and service providers positioned to support long-term export capacity.
- Operators remained focused on efficiency, returns, and balance-sheet health rather than rapid growth.
What We Expect to See in Canada Looking Ahead to 2026
As we look to 2026, several themes are likely to shape the Canadian economic landscape:
- Major infrastructure projects — from container shipping capacity to energy and utilities—have the potential to drive meaningful activity across multiple industries if execution remains consistent.
- There is growing opportunity for Canada to position itself as a more global player, expanding trade relationships beyond heavy reliance on the U.S.
- Businesses that plan for flexibility — whether in equipment, financing, or operations— will be better positioned to respond as policy, trade, and global demand continue to shift.
While challenges remain, there is cautious optimism that clearer direction on trade, infrastructure investment, and global engagement could unlock new momentum across Canadian industries.
Looking Ahead
At Essex Lease Financial Corporation, we work closely with businesses operating in these environments every day. What we’ve seen consistently is that companies who stay adaptable — structuring financing to support both growth and uncertainty — are best positioned to navigate changing market conditions.
As 2026 approaches, thoughtful planning, strong partnerships, and a clear understanding of industry-specific risks and opportunities will remain critical. We look forward to continuing to support Canadian businesses as they prepare for the year ahead.
