Royal Bank of Canada (RBC) reported a Q3 2026 profit of $6 billion, or $4.23 per share, representing an 11% year-over-year increase. Despite record results in commercial banking, CEO Dave McKay expressed caution regarding the escalating trade war between the US and Canada.
To mitigate potential risks, RBC increased its loan-loss provisions by over 50% earlier in 2026. This strategy aims to absorb defaults if trade conditions worsen. Currently, the effective tariff rate on Canadian goods is approximately 6%, with over 80% of exports to the US remaining duty-free.
The US has imposed 50% tariffs on about $20 billion of Canadian goods under Section 338. Economists estimate these measures could reduce GDP growth by 0.3 to 0.6 percentage points and threaten 100,000 to 130,000 jobs. Real estate and consumer goods are considered the most vulnerable sectors.
Other financial institutions are also adjusting to the trade climate. TD Bank has allocated roughly $500 million in provisions for trade-related risks, while CIBC reported that less than 1% of its loan portfolio has direct exposure to tariff impacts. All three banks exceeded analyst expectations this quarter.
