Trump tariff threats create uncertainty for Canada’s farmers

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Canadian products being sent to the United States have been spared a 25 per cent tariff for now, but farmers are still worried since they work in one of the most exposed sectors, particularly in Saskatchewan.

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The province’s exports to the United States account for 50 per cent to 60 per cent of all its exports, so there was relief when Donald Trump didn’t follow through on his threat to impose tariffs on Monday, but he later said they would be imposed on Feb. 1.

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Bill Prybylski, president of the Agricultural Producers Association of Saskatchewan, said the threats have created a climate of uncertainty because there are a lot of unanswered questions.

“To what extent, for how long and to what products will it (tariffs) apply?” he said.

Prybylski said he does not believe the uncertainty about the U.S. market will lead farmers to change what they plan to seed, but it could provide them a chance to look for alternative markets.

“Most producers, I think, will stick to their rotations, but they will hope that maybe there’s a time now where we can develop other markets,” he said.

Market watchers say the tariffs could have an impact on those growing and exporting canola.

Morningstar DBRS analysts Moritz Steinbauer and Reid Usher said the U.S. is not a major market for Canadian canola seed, but it is the top market for canola oil and meal.

They said canola producers are also facing uncertainty when it comes to the Chinese market, which announced a dumping investigation into Canadian canola last year after the federal government imposed tariffs on Chinese electric vehicles.

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As a result, the threat of tariffs from both China and the U.S. has the potential to impact the entire canola industry.

“These tariffs could have a meaningful impact on global canola trade flows and, by extension, Canada’s grain handlers,” they said in their note.

The Canadian canola sector is better positioned than it was previously to deal with both the U.S. and China because of increased domestic processing capability and a more diversified market.

“Even in the event tariffs are imposed, we anticipate global trade flows to ultimately rebalance to a large extent as volumes shift to and from other geographies to satisfy global demand,” Steinbauer and Usher said.

If tariffs are imposed on canola, Americans could look inward for alternatives, given that soybeans are an alternative for canola oil and meal. However, they would have a difficult time finding domestic replacements for crops such as oats.

The Morningstar analysts said any tariffs on agricultural products would likely mean consumers will pay higher prices. As a result, agricultural products could be spared in the event the Trump administration decides to impose tariffs on Canadian imports.

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“As such, we believe there is a possibility that even if the new U.S. administration follows through on its broader tariff threat, agricultural commodities may be carved out.”

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