What do new widespread tariffs mean for Canadian agriculture and food?

Retaliation against new U.S. tariffs from key agricultural producing regions like China and the EU will be worth monitoring in coming weeks.

That’s according to Farm Credit Canada chief economist JP Gervais in a LinkedIn post Thursday morning.

“Tariffs on US exports of key commodities should lead to lower prices,” he said.

Mexico and Canada avoided fresh tariffs on Wednesday with President Donald Trump exempting the United States’ top trading partners from his new 10 per cent global tariff baseline, although previous duties remain in place.

Goods from Mexico and Canada that comply with the CUSMA trade agreement between the three countries will largely remain exempt from tariffs, except for auto exports and steel and aluminum which fall under separate tariff policies.

Gervais’s items to watch included:

• The value of the loonie, which he noted had dropped 1.5 per cent since Wednesday’s close

• How reciprocal tariffs damage the world economy and strength of demand for agricultural goods

• The extent to which steel, aluminum and auto tariffs weaken the Canadian economy

• Whether CUSMA negotiations are fast-tracked.

“And the list goes on,” Gervais said. “This isn’t likely to be the US administration’s last trade action.”

Trump previously imposed 25 per cent tariffs on Mexico and Canada for not doing enough to curb migration and fentanyl trafficking, but later issued a carve out for CUSMA compliant goods.

“For Canada and Mexico, the existing fentanyl/migration … orders remain in effect, and are unaffected by this order,” the White House fact sheet said.

“In the event the existing fentanyl/migration … orders are terminated, USMCA compliant goods would continue to receive preferential treatment, while non-USMCA compliant goods would be subject to a 12% reciprocal tariff.”

Some analysts said Canada and Mexico appeared to have avoided the worst-case scenario.

“The North American partners were shielded from what clearly could have been a very bad day.”

Candace Laing, president and CEO of the Canadian Chamber of Commerce, said in a statement: “We hope that today’s positioning regarding Canada by the U.S. is part of a path to real negotiation, ultimately leading to long-term partnership.”

In retaliation for auto tariffs, Prime Minister Mark Carney said Canada would impose a 25 per cent import fee on all cars not produced under CUSMA.

Carney emphasized that the United States is no longer a friendly partner to Canada and that the country will defend its interests and sovereignty.

Carney said he spoke on the phone with German Chancellor Olaf Scholz on Thursday.

 “We agreed to strengthen the diverse trade relationship between Canada and Germany,” he said. “As we face the crisis caused by President Trump’s tariffs, reliable trade partners are more important than ever.”

Countries must change their rules to allow more imports of American products to escape Trump’s new tariffs, U.S. Commerce Secretary Howard Lutnick said on Thursday.

“The key is, will they take our agricultural products? Will they treat us fairly? Can they treat us fairly? And the answer is, over time, that is going to be yes,” Lutnick told CNBC television. “American products are going to be better sold elsewhere in the world.”

Lutnick told CNBC the Trump administration has been in talks for more than a month with major trading partners around the world about ways to reduce U.S. tariffs.

It will not be “effective for the world to retaliate,” Lutnick said. Rather, the White House would be looking for more fair treatment of U.S. goods, including reduction of trade barriers like value-added tax, which he said acted as subsidies for exports.

“I expect most countries to start to really examine their trade policy towards the United States of America, and stop picking on us,” Lutnick said. “Stop saying that we can’t sell our corn to India. Stop saying that we can’t sell our beef anywhere.”

China on Thursday urged the United States to immediately cancel its latest tariffs and vowed countermeasures to safeguard its own interests.

The U.S. move disregards the balance of interests reached in multilateral trade negotiations over the years and the fact that it has long benefited greatly from international trade, China’s Commerce Ministry said in a statement.

Trump on Wednesday announced China would be hit with a 34 per cent tariff, on top of the 20 per cent he previously imposed earlier this year, bringing the total new levies to 54 per cent and close to the 60 per cent figure he had threatened while on the campaign trail.

The average U.S. tariff on Chinese goods will be 76 per cent, according to Chad Brown, senior fellow at the Peterson Institute for International Economics and chief economist at the State Department for the last year of the Biden administration.

China has been rerouting shipments through countries like Vietnam and Mexico to avoid U.S. sanctions, but now those countries are also affected said Ruby Osman, a China expert at the Tony Blair Institute for Global Change.

China is the largest market for U.S. farm exports, taking $29.25 billion worth of products in 2024.

China reacted to earlier U.S. tariffs by hiking its own levies on $21 billion worth of American agricultural goods—for instance, a 15 per cent tariff on U.S. chicken and a 10 per cent levy on pork and beef.

China is likely to replace some of those imports with supplies from Europe, Rabobank analyst Pan Chenjun told Reuters in a March 5 report.

The U.S. exports about half of its soybean exports to China. During Trump’s first term, China reduced its reliance on American oilseeds. Analysts suggested China would likely shift even more reliance to Brazil and Argentina.

“From a soybean perspective, South American suppliers are likely to benefit. Suppliers of other oilseeds, like canola could also see a boost,” analyst Dennis Voznesenski told.

India said on Thursday it was studying the impact of the 27 per cent tariff slapped by the U.S. on its imports and vowed to push for a trade deal this year, signalling a conciliatory tone despite failing to get relief from President Donald Trump’s trade policy.

Indian and U.S. officials held trade talks in February and the end of March. The U.S. wanted India to reduce levies on products ranging from agricultural goods and alcoholic beverages to automobiles, and was seeking greater market access for U.S. companies.

India’s trade department is “carefully examining the implications” of the U.S. announcement and also holding talks with Indian industry and exporters on their assessment of the tariffs, a trade ministry statement said.

“The department is also studying the opportunities that may arise due to this new development in U.S. trade policy,” it said, and referred to the agreement between Trump and Indian Prime Minister Narendra Modi in February to work on the first phase of a trade deal by autumn 2025.

“The ongoing talks are focused on enabling both nations to grow trade, investments and technology transfers,” it said, referring to negotiations between the two sides. “We remain in touch with the Trump administration on these issues and expect to take them forward in the coming days.”

Tags: agricultural products, imports, China, U.S., exports, Mexico, pork, tariffs, EU, beverages, Canada, oilseeds, Beef, India, chicken