As Mark Carney was sworn in as Canada’s new Prime Minister on March 14, he was well aware of a growing trade war.
He now faces an enormous economic and diplomatic challenge as he confronts the United States, our closest neighbor and ally.
Our 40,000-acre grain farm on the Saskatchewan Prairie, is just 120 kilometers (or 80 miles) north of the border, and for the last three decades we’ve benefitted from a great free-trade relationship with our American friends. I’d guess about 65% of the grain we grow gets shipped to the United States either as a commodity or value-added products like canola oil and malted barley.
Now we’re facing a 25% tariff on Canadian agricultural products and Americans will suffer from retaliatory tariffs from the Canadian government.
A well-known business journalist here in Canada, Amanda Lang, commented that the relationship is like a marriage separation - we don’t know if we will get back together or not, but we have young kids so we must behave with respect, logic and practicality until we determine the actual outcome.
Government policy is the biggest threat to agriculture, and we are now seeing that play out between Canada and the US. As a farmer, it’s hard to plan for government policy at the best of times. It’s even more complicated when those policies change almost daily. With every swipe that President Trump takes at our trade relationship, he creates even more market uncertainty and chaos. This is compounded significantly by the current lack of federal leadership in Canada. While Mark Carney is Canada’s new Prime Minister, he was elected by his party and not by Canadian voters. He is what I consider a “lame-duck” Prime Minister as our Parliament has been prorogued for several months during this trade war. Effectively, our government is in limbo until an election is called.
Tariffs Will Impact Canadian Agriculture
As Canada’s most significant agricultural trading partner, any tariff (currently slated to be 25% but could be lowered to 10%) on our exports will have a significant and damaging impact. It’s easy to say we’ll find new markets, but we must be realistic.
In 2023, the United States imported $40.5 billion in agricultural products from Canada; canola oil represents $4.8 billion. Our reciprocal trading relationship is valued at $72.6 billion. Up until now, the United States has been a stable and reliable trading partner and is geographically close. Replacing that won’t be easy and would take years.
I recently met with a livestock farmer who suffered substantial financial losses on the day the proposed tariffs were supposed to take effect. Based on the assumption that tariffs would be implemented on February , this farmer lost $57,000 on her hog exports that day. These policies have huge financial repercussions that directly affect people’s lives.
Livestock farmers are uniquely disadvantaged in this trade war as animals don’t respect timelines. The longer they stay in the barn and need to be fed, the more expensive they become. Grain farmers at least can store grain in the bin until market conditions improve. Even still, you can’t store grain for unlimited amounts of time, and cash flow is king, sometimes forcing sales into recessed markets.
The largest issue will be the diversion of investment from Canada to the United States. We hear almost daily that companies are considering shifting their operations to the United States, which will have a negative effect on production, hiring, wages and our overall GDP.
Agriculture globally relies on free trade and free trade agreements, so it is troublesome that Trump is not following the USMCA, a deal he brokered during his first term as president.
Diplomacy over retaliation
It’s easy to say that Trump is bluffing or that he will back down, but we must be prepared for the worst.
Retaliatory 25% tariffs on US imports, which the Canadian government has proposed, are an attempt to protect Canada’s interests, but will indirectly hurt farmers. Retaliatory tariffs would increase the price of goods that farmers rely on such as equipment, feed, fertilizers, and seeds. Neither country wins in a trade war.
Canada is rich in natural resources— agriculture, oil and gas, and critical minerals—so we do have considerable leverage in these negotiations.
Diplomacy is the right course of action.
I’ve been impressed with the work of provincial premiers in Saskatchewan, Alberta, and Ontario. They are taking it upon themselves to meet with leaders in Washington, on Wall Street, and with state governors. This is where we can have meaningful conversations and use diplomacy to reach a long-term trade deal that secures North American agriculture, border security, and free and fair trade.
Additionally, where are the voices of the large multinational corporations that we do business with? Seed, chemical and fertilizer companies on both sides of the border should be standing up and voicing the concerns of the agriculture industry.
In the meantime, North American farmers should focus on what we can control
The rules of supply and demand don’t seem to matter in the Trump era. His political statements cause erratic shifts in the markets and the best advice is to watch the markets closely.
The key to surviving 2025 will flexibility. It is times like these when we need to be crystal clear on our cost of production - don’t wait for the high or the low of the markets, focus on consistent gains.
Volatility can also create opportunity. It may be hard to think about growth and expansion at a time of such uncertainty, but it’s true what they say: Never waste a crisis. The ability to sustain or grow during a down cycle is how you create a competitive advantage. There are still many reasons to be positive about the upcoming season.
As I reflect on some of the most significant geo-political issues I’ve witnessed in my years of farming, this new trade war is another one to add to the list: NAFTA and USMCA, the mad-cow crisis, China halting Canadian canola imports in 2019. All of these prove one thing: farmers are resilient. We continue to persevere, growing food for the world and getting it to markets one way or another. We can’t be silent. As farmers, we must speak up. Globally, we need to stand together and advocate for the critical role that free trade plays for our industry, our countries and the world.
