Uncertainty for Manitoba Farmers Amid China's Retaliatory Tariffs on Canola

A Manitoba farmer has expressed concern regarding China's recent decision to impose 100 percent retaliatory tariffs on canola oil and oil cakes. This development is contributing to an atmosphere of uncertainty within the agriculture industry, especially while farmers are also contending with potential U.S. tariffs on canola products.

Details on the Tariffs

According to China's Commerce Ministry, these tariffs will take effect on March 20, and they serve as a response to Canada's own tariffs on Chinese electric vehicles and specific aluminum and steel products. Bruce Dalgarno, a canola and crop farmer from Newdale, Manitoba, highlighted that Canada exports around 2.5 million tonnes of oil cakes to China each year, which are utilized for livestock feed or processed into oil meal.

Dalgarno noted that reduced shipments could compel grain elevator companies to decrease canola prices and redirect exports to different markets, thereby affecting farmers' profitability. He stated, "Farmers will be examining their input costs, as the expenses tied to growing canola are already the highest among all crops. As prices fall, competitiveness in the market diminishes." Furthermore, Canada exports only a small volume of canola oil to China—roughly 600 tonnes a year—so the impact on the broader Canadian economy might not be significant.

Trade Relationship with China and the U.S.

Currently, no tariffs are imposed on canola seeds from Canada, with exports to China estimated between five million to six million tonnes annually. China is Canada's second-largest trade partner after the United States, which has its own tariffs affecting Canadian agriculture, including a 25 percent levy on various goods.

Dalgarno suggested that the tariffs from the U.S. could potentially have a larger impact compared to those from China. Such tariffs could create an even greater challenge if they were extended to include canola seeds destined for China. The value of canola oil exports to the U.S. was significant, amounting to approximately $1.3 billion for Manitoba's economy in 2023.

Impact on Manitoba Farmers

Warren Ellis, president of the Manitoba Canola Growers Association, which includes around 7,500 members, stated that increased costs stemming from the tariffs would directly affect farmers' incomes and the selling price of canola seed. He said farmers must explore ways to cut costs while hoping that input prices will slightly decrease, allowing them to maintain some profit margins.

Ellis mentioned that canola seed, canola oil, and oil cakes represent approximately $5 billion in exports to China, while exports to the U.S. are valued at around $8 billion. He emphasized that farmers have faced numerous challenges in the agriculture sector, but there are limits to what they can endure without suffering considerable collateral damage.

Government Response and Future Considerations

The Manitoba Canola Growers Association plans to advocate for provincial and federal government action to address the consequences of the tariffs on Canada's agriculture sector. Prime Minister Justin Trudeau explained that Canada imposed these tariffs in response to what he described as a deliberate policy by China to create overcapacity.

In an effort to support the impacted Canadian businesses and farmers, the federal government announced relief measures, including $1 billion in new financing through Farm Credit Canada aimed at alleviating some financial pressures. Dalgarno noted that the Canadian government must provide strong support for the agriculture sector, particularly canola growers, who are experiencing the most significant backlash from these trade tensions.

Looking Ahead

Chris Davison, president and CEO of the Canola Council of Canada, predicts that the Chinese retaliatory tariffs will have a widespread negative effect throughout the industry. With the total economic impact of the canola sector exceeding $43 billion annually, the future of trade between Canada and China appears uncertain as tariffs complicate the canola market.

Vincent Wenzel, director of international trade at the Canola Council, stressed the need for the Canadian government to systematically engage with China to resolve these trade disputes. Additionally, the Chinese government will also impose a 25 percent duty on Canadian aquatic products and pork.

tariffs, canola, China