Agriculture sectors look for footing after Trump tariff threat

Speculation about U.S. tariffs hit a new gear for Canadian agriculture sectors in the last week of November. U.S. President-elect Donald Trump had already threatened a 10 per cent tariff on products coming into the U.S. while on the campaign trail. That fostered wariness from many farm groups whose industries are heavily reliant on exports and on the harmonized trade system between Canada and the U.S. The same hardball tone had groups worried about the scheduled 2026 review of the Canada-U.S.-Mexico Agreement. In mid-November, a representative from the Embassy of Canada to the United States warned that Trump could fast track that review. On Nov. 25, Trump upped the ante to a threatened 25 per cent tariff against all products from Canada and Mexico, setting the stage for a major trade dispute between the three CUSMA signatories. Trump said he would sign an executive order imposing the tariffs on his first day in office in January, linking the move to border issues and demanding Canada and Mexico clamp down on the flow of illegal drugs and migrants to the U.S. Why it matters: Threatened U.S. tariffs could reframe the trade relationship with Canada’s biggest trading partner and spark a trade war. The news was met by widespread debate. Analysts opined on what Canada should do if the tariffs are imposed, how and whether it could retaliate, what it would mean for CUSMA and how seriously Canada should take Trump’s comments. Dennis Laycraft, executive vice-president of the Canadian Cattle Association, thinks the president-elect should be taken at his word. “It’s not idle talk,” he said. “If he’s not satisfied that things are being done, he would move forward. So we (have) got to take everything he says very seriously.” Laycraft, who has spent much of his career finding new markets for Canadian beef, says Trump’s track record speaks for itself. Relations between the U.S. and Canada frayed during Trump’s first term, when he took issue with the North American Free Trade Agreement. That led to NAFTA’s replacement by CUSMA. Canada’s supply managed dairy sector in particular drew his administration’s ire. He wanted more access for U.S. dairy products north of the border. Tariffs became a hallmark of Trump’s trade policy. His first term saw penalties for Canadian lumber and months of tariffs against Canadian steel and aluminum in 2018 and Canada launched a list of retaliatory tariffs in response. Trump played the tariff card against Canadian aluminum again in 2020, although that announcement was short-lived.

Bracing for hits

A 25 per cent tariff could have serious consequences for Canadian-grown agricultural commodities like grain, pork and beef. Manitoba alone sends about three million piglets each year to producers in Iowa, Minnesota, South Dakota and Nebraska, where feed corn can be sourced more cheaply, according to the Canadian Pork Council and Manitoba Pork Council. Midwestern farmers then raise and fatten the animals before sending them to slaughter. Pork flows to buyers in the U.S. and Canada after processing.

Manitoba Pork Council general manager Cam Dahl said Trump’s statements are the latest manifestation of a gradual non-partisan slide into U.S. protectionism. “For example, we have a country of origin labelling that’s come back and is going to discriminate against Canadian live cattle and live hogs. We have things like individual state initiatives on animal welfare like Proposition 12 in California,” he said. The original country of origin labelling rule, rolled back in 2015, was mandatory, while the new U.S. version is characterized as voluntary, although Canadian producers say that distinction will make little practical difference. Proposition 12 sets out animal treatment standards for products sold in California. Critics are worried about the impact of state-specific rules on the harmonized value chain. Dahl noted the sheer number of animals sent from Manitoba to the U.S. every year. “On an annual basis, the pork industry contributes about $2.3 billion to Manitoba’s GDP. We employ about 22,000 people, and when you take away the largest market that those 22,000 people are working to fill, of course it would have a big, big impact in Manitoba. “And that’s not just for hog producers. That’s across the entire province.” On the beef side, the Canadian beef industry expects $2 billion in live cattle exports and at least $4 billion in beef exports to the U.S. over 2024, said Laycraft. Canada is also a large import market for U.S. beef and cattle, he noted. Around $500 million in live cattle and about $1.5 billion in beef imports from the U.S. will come into Canada this year.

Canada’s minister of agriculture maintains that the cross-border trade relationship can weather the promised storm. “We’ve dealt with the Trump government previously and we’ll do it again,” Lawrence MacAulay told reporters Nov. 26. “We will deal with each issue as they come forward.” MacAulay said Prime Minister Justin Trudeau spoke with Trump shortly after the new tariff comments were made. The ag minister also pointed to a re-established cabinet committee on Canada-U.S. relations, which he said will focus on such issues. Laycraft, likewise, believes there’s a reasonable chance the highly integrated nature of U.S.-Canada trade will drive support for maintaining the status quo on both sides of the border. “I think when people look at the benefits on the total increase in trade and being able to have these solid trade agreements with your most trusted trading partners, there’s a lot more pros than cons in any review or renegotiation moving forward.” The CCA and stakeholders will analyze different scenarios and outcomes and share that information with producers. “In situations like this, the best you can do is try and give people the best possible information to make decisions moving forward,” Laycraft said Potash mining company BHP suggested that diversification will be its answer to the tariff threat. “We have a strategy to be geographically diversified with our sales, so we will not just sell to the U.S. We will sell all over the globe,” said Karina Gistelinck, asset president of potash for BHP in Saskatchewan. “Obviously, the U.S. is a big end-user consumer for potash, and we will take that into account.” Gistelinck added that “tariffs come and go” and the Australian-owned BHP prioritizes resilience to tariffs and other price changes. Dahl said he hopes the tariff threat will drive better recognition of the U.S.-Canada ag trade relationship among stakeholders like the federal government. “Our provincial government is very engaged,” he said. “We need to have that on the federal side of agriculture and food, as well as the other provinces, to really reach out and have these conversations with individual states as well as with representatives and senators and the new administration coming in.”

Game planning

Peter Tabor, an attorney and senior policy advisor at Holland & Knight, and a former U.S. Department of Agriculture trade official, is among those pondering whether the tariff threat is a trade negotiating tactic. He recently told Reuters that steep tariffs over time could paint the U.S. as an unreliable trading partner. Importers of U.S. goods might start to look elsewhere, he suggested. Michael Harvey, executive director of the Canadian Agri-Food Trade Alliance (CAFTA), suggested letting cool heads prevail when speaking to U.S. officials about tariffs. Emphasizing the successful integration of U.S.-Canada ag trade is paramount. “We think it is important that governments should not overreact, but calmly prepare the strategy to respond to these statements about possible tariffs,” Harvey wrote in an email. “Canada’s agri-food sector works in integrated supply chains that include American counterparts who will be working to protect what we have built up. “CAFTA and its members, which include producers, are working with U.S. counterparts to ensure both governments understand the importance of these chains to both countries.” Manitoba Premier Wab Kinew told media Nov. 26 that Canada needs to show Trump that it is serious about border security. “We need more RCMP,” Kinew said. “We need more Mounties to bring the hammer down on drug traffickers. I think responding to that concern today will also help us on the trade side.” Manpower is only part of the equation, said Kinew. He would also like to see police use high-tech tools such as drones for better enforcement outcomes. He added that Canada should hit its goal of spending two per cent of GDP on defence as a show of good faith to the Trump administration. Canada’s defence spending levels and NATO contributions have been a longstanding sore point for the president-elect. “Hitting that target of two per cent spending on defence just sort of … gets us in the game just to be taken seriously as a security partner with the U.S. If we don’t do it, it’s going to become a trade problem,” Kinew said.—With files from Karen Briere, Janelle Rudolph, Geralyn Wichers and Reuters

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