As Donald Trump’s inauguration approaches, Canada’s agricultural industry is waiting with bated breath to see whether the sweeping tariffs he has threatened will become a reality.
If they do, producers would have to fill gaps left by restricted access to the country’s largest trading partner and consumers could be forced to pay higher prices.
“When a new administration comes to your number one market and talks about their interest or intention to impose tariffs, that’s certainly not something that should be ignored,” said Chris Davison, president and CEO of the Canola Council of Canada. .
“At the same time… we don’t want to overreact.”
President-elect Trump recently threatened Canada and Mexico with 25 percent tariffs.
Canada responded quickly: Prime Minister Justin Trudeau touted the need for a united front to deal with the new administration and flew to dinner with Trump at Mar-a-Lago.
Prepare for higher prices
The Canadian food supply chain is highly integrated with the United States, said JP Gervais, chief economist at Farm Credit Canada.
The tariffs, which are applied to products from other countries, would increase the cost of doing business and reduce the profits of Canadian producers, Gervais said. They could introduce more volatility into the market and make it difficult for companies to make new business plans and investments, he said.
“We have tried over the years to diversify our export base and we have succeeded to some extent, but the reality is that we are very dependent on the United States,” Gervais said.
“So the consequences from an economic point of view would definitely be negative.”
Canola is one of the major Canadian exports that would be affected by tariffs.
The United States is the largest market for Canadian canola, Davison said. In 2023, Canada exported about $8.6 billion worth of canola to the United States, of which about $6.3 billion was canola oil and the rest meal and seed, he said.
Canadian beef is also caught in uncertainty. Most of our beef and live cattle exports go to the United States, said Dennis Laycraft, executive vice-president of the Canadian Livestock Association: about $6 billion, compared to $1 billion going to the rest of the world. .
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Laycraft and Davison said that if tariffs were enacted, producers would begin to look at other export markets as they face price pressure and restricted access.
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“We have very good market access, particularly in Asia, which has strong demand,” Laycraft said.
“But you can’t just replace a huge market like the United States.”
Market watchers have warned that American consumers could suffer higher inflation as a result of Trump’s protectionist tilt.
“I think initially the impact would be on American citizens and the cost of purchasing those products, but eventually that would trickle down to farmers here in Canada,” said Keith Currie, president of the Canadian Federation of Agriculture.
But the impact would eventually reach Canadian consumers as well, said Arrell Food Institute director Evan Fraser.
He noted that the Canadian dollar has already lost ground against the greenback since Trump’s election, which would over time add inflationary pressure on U.S. imports.
Canada relies heavily on the United States for certain foods, Fraser said, such as agricultural products, especially during the winter.
Negotiation strategies
The last time Trump was president, the old North American Free Trade Agreement was scrapped and replaced by the Canada-United States-Mexico Agreement.
Currie hopes the agreement, which will be reviewed in 2026, will help guide tariff talks.
“There are… dispute resolution mechanisms within that agreement. Therefore, imposing tariffs on products that are supposed to be allowed through a free trade agreement goes against what the agreement says.”
Experts have said the threats are unlikely to come true, but it is still important to take them seriously as they are likely part of Trump’s negotiating strategy.
“Trump huffs and puffs a lot, but it remains to be seen whether he will actually slap tariffs on our products,” Currie said.
“The new president may think he is doing the right thing by his citizens,” he added, but “the reality is that it will also affect their businesses because of the integration of our two systems.”
“Harder, not easier”
Trump’s election and his protectionist promises are part of a larger shift that will influence the Canadian agri-food sector for years to come, Fraser said.
He calls it “an era of disruption.”
After decades of expanding trade in the name of globalization, “we are moving into what you might call a frothy historical period, where climate change and the volatility of energy prices and the challenges around supply chains and restrictions around work… all of these things are disappearing. become harder, not easier,” Fraser said.
Because of this, expect more nearshoring in the coming years as export-led growth and globalization lose ground, meaning the economic case will be stronger for investing in local processing and manufacturing.
The canola industry has already been working for some years to mitigate potential trade disruptions, Davison said.
“Probably the most important thing our industry has done in recent years, and continues to do, is expand our own canola processing capacity here in Canada,” he said.
Canada may not be able to replace the United States as a trading partner, but it can further diversify its agri-food exports, Laycraft added.
“It certainly helps to have markets where more product can be moved in the short term, and in the long term, we believe we will see our market share grow in the Pacific region,” he said.
The canola industry is also looking at other markets, Davison said, including Indo-Pacific countries that have growing feed industries.
“We are always looking for diversification opportunities,” he said.
“But… when you’re talking about high-value markets the size of the United States, for example, those types of markets don’t grow on trees.”
