Market conditions in 2026 have been another mixed bag for the fluid power industry. Trade policies continue to present challenges, and some customer markets remain soft while others have begun to pick up.

As Ken Baker, CEO, Bailey International, explains in this Q&A with Power & Motion, demand for agricultural equipment continued to be low this year but the truck and trailer market is starting to pick up. And the rising buildup of data centers has benefited the construction equipment market.

Despite some of the market challenges faced this year, there have been a number of technological opportunities. Baker noted these have included the greater customer interest in system integration as well as the ever increasing convergence of hydraulics and electronics — trends which are likely to continue in the year ahead.

Read our full interview with Baker below to learn more about how he sees these technology trends progressing further, his reflections on 2026 and expectations for 2027.

Editor’s note: Questions and responses have been edited for clarity.

Power & Motion: From your perspective how have market conditions been in 2026 for your company and the fluid power industry as a whole?

Ken Baker: 2026 has been a mixed year so far. Agricultural equipment demand stayed soft. Construction and infrastructure-related markets have been steadier. Residential construction has struggled, which affects our forestry equipment business.

With that said, things seem to be recovering somewhat. Ag seems to be improving slightly as farmers get into required replacement needs. The trucking and trailer market is also starting to pick up, from a very low point. Construction, mainly around data centers and some infrastructure, seems steady. We are also seeing stronger demand for our domestic manufacturing operations.

Power & Motion: What factors have presented challenges this year for your company, or the industry as a whole?

Ken Baker: Trade policy and tariffs have been the biggest wildcards. Shifting tariff schedules on steel and country-by-country have caused continuous evaluation of sourcing and raw material input pricing. 

The latest United States International Trade Commission (USITC) investigation has caused significant uncertainty in the market as well.

Power & Motion: What opportunities, from a market or technology perspective, or both, have you seen this year, and do you expect these opportunities to continue in the year ahead?

Ken Baker: The clearest opportunities have been two-fold. First, more customers are looking for subsystem integration and expertise from their partners. Second has been the continued convergence of hydraulics and electronics.

Customers increasingly want a single partner who can deliver the mechanical system and the electronic controls, sensors, and software that work together. These themes will continue to resonate in our industry.

Power & Motion: What are the most requested features or capabilities you've been getting from customers this year, and how, if at all, do they fit in with broader industry-wide trends?

Ken Baker: The most common request is for integrated electronic control and subsystems. They want more design and implementation assistance from their supply partners. 

We have responded by further strengthening our Sales Application Support (SAS) team and our internal engineering teams. We are also working through process improvement, technology improvement and AI (artificial intelligence) implementation with our internal teams to better serve our customers. 

We're also seeing expectations for faster and better application engineering support, which isn't a new theme but has intensified. Customers want pricing, availability, and solutions information faster so they can make their decisions faster.

Power & Motion: Are there any technology trends or development areas that you've seen have a large impact on the fluid power industry in 2026?

Ken Baker: Electrification continues. Not a full replacement of hydraulics yet, but demand for hybrid architecture where electric power management and hydraulic actuation work together. This is focused mainly in material handling and some compact equipment.

This push has required us to improve integration between our electronics and hydraulics divisions.

The other significant development area is sensor additions to components and systems for improved feedback.

Power & Motion: Are there any new trends you see influencing the fluid power industry in 2027 and beyond? If so, what are those trends and how do you anticipate them impacting fluid power designs and/or the industry?

Ken Baker: Subsystems and integration work will continue. This will require that we continue to ensure strong cross-functional technical strength in our company.

I also expect efficiency and safety improvement to continue, at least with customer demand if not by regulation. 

Workforce development will continue to grow in our industry.  We need to continue making electro-hydraulic careers attractive to a new generation.

Power & Motion: What opportunities do you see for the fluid power industry in 2027? Are there any markets you anticipate doing well or offering areas of opportunity in the coming year?

Ken Baker: We continue to watch agricultural equipment for a slow, cyclical rebound. The market has been down long enough that pent-up replacement demand is building. Infrastructure-driven construction and forestry equipment should stay reasonably strong given continued public investment.

Beyond specific end markets, I see real opportunity in aftermarket replacement service, with customers holding equipment longer and wanting to extend its life cost-effectively.

We also expect a steady growth in our domestic manufacturing operations. This may be accelerated with the conclusions of the USITC investigation and action.