Canadian agricultural producers are warning of devastating impacts from new Chinese tariffs that began Thursday, which they say will compound the economic strain from the U.S. trade war.
China has imposed a 100 per cent levy on Canadian canola oil and meal, as well as peas, plus a 25 per cent duty on seafood and pork.
Those are on top of existing 25 per cent tariffs on a majority of exports to the U.S., which is set to bring in further “reciprocal” tariffs on April 2 that match those put on American goods.
“If you’re a processor, you’re going to feel the pressure of this in a much more meaningful way going forward,” said Erik Johnson, a senior economist and vice-president at Bank of Montreal Capital Markets.
For Tara Sawyer, an Alberta grain farmer and chair of Grain Growers of Canada whose crops include canola, the Chinese tariffs compound the tough time she and other farmers have faced over the past two to three years, with below-normal revenues due to drought and rising operating costs.
The tariffs also come just weeks before seeding begins for this season’s crops.
“This makes what’s already been challenging quite devastating, really,” she told Global News.
Why did China impose these tariffs?
The tariffs are in retaliation against Canada’s 100 per cent levies on Chinese-made electric vehicles and a 25 per cent tax on aluminum and steel products, which were announced last year.
The federal government has accused China of unfairly subsidizing its EV industry in order to get cheap vehicles into North America, threatening Canada’s auto industry.
The EV tariffs matched similar levies imposed by the U.S. for the same reason.
China launched “anti-dumping” investigations into Canadian canola imports in September 2024 in response, and announced the new tariffs on March 8 as a result.
“It’s a punitive number made up by the Chinese regime,” Daniel Trefler, an economist and professor at the University of Toronto’s Rotman School of Management, said about the 100 per cent tariff on canola products.
“Canada is trying to protect itself from what would be the total collapse of our auto sector if we allow China to massively subsidize their autos…. [Canada’s EV tariffs on China] were arrived at after careful consideration and reflects the reality in China.”
The growing trade war has upended recent efforts to improve relations between Ottawa and Beijing from the low point of 2019 and 2020, when Canada detained Huawei CFO Meng Wanzhou. China targeted canola exports in retaliation at that time too, as well as Canadian nationals in China.
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Relations are even more tense after it was revealed Wednesday that China has executed four Canadians for “drug-related crimes” this year.
What could the impact be?
China is Canada’s top export market for canola seeds, oil and meal. The Canola Council of Canada says economic activity with China was almost $5 billion last year, including nearly $1 billion in canola meal.
Sawyer, who manages a 4,000-acre grain farm in Acme, Alta., says the new tariffs effectively shut the door on that market due to the steep rate.
“Where are we going to be selling that canola, or can we?” she said. “It’s really stressful, and it’s changing all the time. There’s so much uncertainty.”
Johnson notes that canola seeds, which make up a majority of Canada’s canola trade, aren’t included in Thursday’s tariffs, although Beijing has said it is continuing to investigate alleged dumping of those exports.
When China’s anti-dumping probes were first announced, credit agency Morningstar DBRS said resulting tariffs could lead to a “billion-dollar hit” for the country and its supply chain.
The Canola Council of Canada estimates the industry lost between $1.54 billion and $2.35 billion between March 2019 and August 2020 from lost sales and lower prices due to China’s previous tariffs.
Canola prices could fall further in Canada as producers look to sell off product that was previously meant for Chinese export, Sawyer and economists say.
The Fisheries Council of Canada, meanwhile, said in a statement this month that a 25 per cent Chinese tariff on seafood products is an “existential threat” to the industry. It said the combination of tariffs from China and the U.S. will “effectively cut off” 83 per cent of Canada’s seafood export markets worldwide.
According to the federal government, China is Canada’s second-largest fish and seafood export market after the U.S., with $1.3 billion in products shipped there last year. Some export markets, like geoduck clams out of British Columbia and elvers in the Maritimes, rely almost exclusively on Chinese buyers.
As for pork, China is the third-largest export market behind the U.S. and Japan, with over $43 million in products exported over the past year.
“These Chinese tariffs could not have come at a worse time,” Keith Currie, president of the Canadian Federation of Agriculture, said in a statement this month.
Trefler said while China’s tariffs may not impact inflation, they will have “huge” effects on employment and output, with farms potentially forced to lay off workers or close altogether.
“It’s devastating not only for the individual farmers but for the communities that surround those farmers,” he said.
Johnson said China’s actions, while destabilizing to specific industries, still pose less uncertainty than the ever-evolving trade policies out of the Trump administration in the U.S., which continue to be the driving factor for recession fears.
“There’s already been some emphasis on [diversifying trade away from China] for years,” he said. “The challenge is, some of that reshuffling has been toward a partner [the U.S.] that we’re now less certain of.”
How are governments responding?
The federal government and provinces where affected sectors are concentrated are being asked to support producers whose bottom lines will be hit.
Agriculture Minister Kody Blois said Wednesday that he has spoken with his counterparts in Alberta and Saskatchewan about using “all the tools in our toolbox, including our Business Risk Management programs, to support our canola, pea and pork farmers.”
“We’re focused on making sure there are supports, to make sure that there are mechanisms in place to support those impacted producers,” he told reporters after a cabinet meeting in Ottawa. He said more details will be shared in the coming days.
“This is significant.”
Alberta’s government set aside $4 billion this year to manage its response to tariffs, up $2 billion from the year before.
Alberta Premier Danielle Smith told reporters Wednesday there was a potential for a “made in Canada solution” to ensure canola crops can get to market.
“I don’t have a solution for pork yet,” Smith said. “I have doubled my bacon intake as a measure of support.”
Manitoba’s budget, announced Thursday, included broad plans for hundreds of millions of dollars for supports for businesses, agricultural producers and individuals, and also introduced new tax measures to help spur investment.
Saskatchewan, with a slim $12-million surplus in its budget tabled Wednesday, did not set aside money to help manage the potential impact of tariffs.
Nova Scotia Fisheries Minister Kent Smith told reporters Wednesday that the government can provide assistance to seafood producers from its $200-million contingency fund established to deal with the impact of tariffs if necessary.
But he also downplayed the potential short-term impact of China’s new levies, saying he heard “cautious optimism” from producers at a three-day seafood expo he attended with Premier Tim Houston this week.
Industry groups say government will eventually have to step in with new supports to address China’s tariffs specifically, saying the relief launched in response to U.S. tariffs won’t be sufficient.
Sawyer said she’s particularly concerned about farmers’ mental health as they deal with additional stress.
“Everybody is struggling with what to do,” she said.
— with files from The Canadian Press
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