“Trump won’t actually put tariffs on us, will he?”
That’s a common question across Canadian agriculture as the dust settles on a decisive Republican victory in the U.S. presidential election.
During the campaign, Donald Trump repeatedly talked about applying universal tariffs in the 10 to 20 per cent range, with the possibility of somewhat higher levies on imports from Mexico and much higher tariffs in the range of 60 per cent on anything coming from China.
“To me, the most beautiful word in the dictionary is tariff. It’s my favourite word,” he said in an interview in mid-October.
While protectionism is in style in the U.S. and would have been a problem for Canada no matter who won the White House, the possibility of tariffs in the near future became reality with Trump’s victory on Tuesday night. And it’s obviously a major concern for the Canadian economy, including agriculture, with the U.S. market accounting for three-quarters of Canada’s exports.
We’re told Canadian government officials have tried to gain insight on Team Trump’s tariff plans over the past few months, but that they have had no luck in getting any information or assurances of an exemption for Americans’ cousins in Canada.
The high-level of integration in supply chains on both sides of the Canada-U.S. border, including in agriculture, provides a good reason to believe Trump’s tariff threats are just threats, but it’s hardly reassuring, especially if the policy goal is to domesticate those integrated industries.
“I take everything President Trump says very seriously. That’s why we have been very conscientious, very systematic about maintaining our relationship and lines of communication with the Trump team,” said Canada’s Finance Minister Chrystia Freeland, during a press conference in Ottawa on Wednesday.
“The Canada-U.S. partnership is absolutely fundamental to the economies of both our countries, and we have really effective experience working together with a number of administrations, and with this specific team, and have really built some enduring relationships — I would even say friendships. So we’re looking forward to continuing to work together for the prosperity and security for people on both sides of our shared border,” said Freeland.
If tariffs are actually implemented, projections for damage to the Canadian economy vary, largely depending on the extent of the retaliation by trading partners, such as Canada and the European Union. Assuming a 10 per cent tariff on exports to the U.S. and reciprocal retaliation, analysis by University of Calgary economist Trevor Tombe has projected a 5 per cent decline in Canada’s GDP. The pain would likely be much higher than that in highly-integrated sectors of agriculture, such as the pork and beef industries.
Given his transactionary approach to deal-making, one possible scenario is Trump will threaten to implement tariffs at a future date and then try to extract concessions from trading partners in exchange for not implementing them. In Canada’s case, dairy market access would be on the list of obvious targets, given U.S. grievances with access to the supply-managed sector.
There are also questions about whether Trump 2.0 tariffs will be targeted or broad-based. Former USTR Robert Lighthizer, who could possibly return to the trade czar post or be appointed commerce secretary, has indicated his preference would be to quickly apply non-targeted tariffs, and potentially raise them over time to drive investment in the U.S. and reduce the trade deficit.
Staying in the trade realm, one silver lining for Canada’s pork industry is that the odds of a Farm Bill passing have increased with Tuesday’s result, with the Republicans controlling the Senate and likely winning the House. That’s significant because a Farm Bill could overwrite California’s Prop 12 rule that prohibits the sale of pork, veal, and egg products unless they meet certain animal housing requirements.
The scheduled review of the Canada-U.S.-Mexico trade deal also looms in 2026. Talks are expected to begin after the new U.S. administration is in place, with a high likelihood it will turn into an intense renegotiation and test of each country’s commitment to a trilateral deal. Most of Trump’s complaints about the trade agreement that was negotiated during his first term have revolved around Mexico and concerns about China accessing the North American market through Mexico.
Beyond trade, there are several other things to watch that will likely affect Canadian agriculture to varying degrees, including the direction a Trump administration takes on environmental files in agriculture, who will be named as U.S. ag secretary, where biofuels fit into the picture, how farm-friendly a new Farm Bill could be, and the possibility of large numbers of people entering Canada as a result of Trump’s commitment to mass deportation of illegal immigrants.
Stay tuned to RealAg as we’ll have plenty of coverage and discussion about these topics in the coming weeks.
