Food & Climate
The Trump administration and its trade war are raising concerns in Canadian farm sector, with tariffs threatening Toronto’s exports of a range of goods, including greenhouse vegetables and pork, raising food prices for consumers and hampering farmers’ efforts to adapt to climate change.
Amid tariff threats and even the possibility of U.S. annexation, worsening climate impacts will make it harder for the Canadian farm sector to diversify or grow domestic markets, said Geneviève Grossenbacher, director of policy at Farmers for Climate Solutions, according to a report seen by “Food & Climate” platform.
“More than ever, building climate resilience is important to safeguard our national food security and economic viability long term,” Grossenbacher said. To support farmers, policies must focus on building resilience and lowering costs on farms.
Since Donald Trump’s inauguration three weeks ago, uncertainty over trade has forced Canada to reevaluate economic ties with its unpredictable southern neighbour. Earlier this month, Canada and Mexico were both tentatively spared from a trade war with a 30-day reprieve, but on Monday Trump announced 25% tariffs on steel and aluminum from all countries, including Canada, and businesses are already feeling the effects.
A 51st U.S. state
The tariffs are especially concerning given Trump’s continuing rumblings about using economic pressure to push Canada into becoming a 51st U.S. state—a claim that Prime Minister Justin Trudeau privately acknowledged in a recent meeting as “a real thing”.
Canada’s National Farmers Union (NFU) responded to Trump’s threats by calling for a stronger focus on food sovereignty. The union advocates for diversifying export markets, building regional and local markets, and preventing corporate profiteering, among other things—to protect Canadian farmers, workers, and consumers.
“The democratic control of important decisions about food and agriculture… is a key strategy to withstand President Trump’s economic pressure tactics, which are brazenly aimed at annexing Canada,” NFU wrote in a news release.
Climate change further complicates the outlook for Canadian farmers, with unpredictable and severe weather affecting yields. In a nation-wide poll, more than three-quarters of Canadian farmers recently said they had experienced severe weather in the last five years and ranked climate change among the top challenges facing the sector in the coming decade.
Solutions come with a hefty price tag. Building climate resilience on farms often depends on adopting new practices, said Max Hansgen, president of an NFU Ontario chapter. This may involve costly options like acquiring new equipment or hiring more labour. The changes would pay off in the long term, but in the interim farmers would need to raise product prices or increase production to make ends meet.
When combined with Trump’s tariffs, price increases to accommodate new practices could make homegrown farm products too expensive to sell. And increasing production without a viable market is “an obvious waste of capital,” said Hansgen.
“In an effort to remain competitively priced, farmers may opt to continue current practices to keep costs down.”
But the reverse could also be true for farms that are not reliant on export markets. If increased domestic demand created “the exact opposite economic conditions,” Hansgen added, it could help farmers invest in infrastructure changes that promote climate resilience.
“Proposed Canadian counter-tariffs and consumer sentiment could be a boon for producers who focus on the domestic market”, according “The energy Mix”.
How U.S. Tariffs Affect Canada’s Farm Sector?
FCC which invests in Canadian agriculture and food, tried to evaluate how US Tariffs Affect Canada’s Farm Sector.
The company said: “American tariffs on Canadian exports, which the White House had signaled would be implemented this week, have been delayed to March. The only positive from this one-month reprieve is the extra time it gives businesses to prepare for upcoming challenges”.
We decided to find out which industries, in the agriculture and food sectors, would be the most vulnerable to a trade war. There are at least two elements to consider here: 1) sales exposure to the U.S. and 2) the sector’s financial situation. Sectors with high sales exposure to the U.S. and who are struggling financially, are arguably the most vulnerable to tariffs.
The greenhouse vegetable sector, for example, is highly reliant on the U.S. market and the sector is coming off a year of weaker margins. This puts the sector in a vulnerable position to absorb any trade shocks.
For the food manufacturing sector, roughly 30% of sales goes to the U.S. in the form of exports. This is significant but within that sector, some sub-sectors have even larger exposures.
For instance, fruit/vegetable preserving and specialty food manufacturing is at the highest risk, the sector relying on the U.S. market for almost half of sales, while also struggling with negative margins in recent years. Seafood product and preparation is also in a vulnerable position as margins are tight, while sugar and confectionery is highly vulnerable because the U.S. accounts for over 80% of its sales.
Looking at livestock, hogs are particularly vulnerable given the high exposure to the U.S. and the fact that the sector, despite stronger margins than the previous 5-year average, is coming off multiple years of negative margins, hindering its ability to absorb any impacts to prices or expenses.
Cattle producers are in a better position than others to weather the tariff storm thanks to solid profitability of recent years, particularly for cow-calf. But one can expect feedlots to have tighter margins and therefore would be more at risk from tariffs, according to “FCC” website.