Chinese tariffs hit Canadian grain farmers as trade conflict intensifies

China is set to impose steep tariffs on Canadian grain products starting March 20, adding to an already escalating trade dispute with the US, and leaving Canadian farmers anxious over mounting economic uncertainty.

China announced on March 8 tariffs of up to 100% on Canadian canola, canola oil, peas, and other agricultural products in retaliation to Canada's decision in August 2024 to impose steep taxes on Chinese electric vehicles, steel, and aluminum.

The tariffs are also seen as an indirect warning to Canada against deepening trade ties with the US after American complaints about cheaper Chinese alternatives continuing to enter the American market through Canada despite existing tariffs.

Further heightening trade tensions, US President Trump announced in March plans to increase tariffs on China to 20%, prompting China to respond with 10% and 15% tariffs on key US agricultural products.

Canadian farmers demand government action

With a weakened Canadian dollar, an escalating trade dispute, and a new prime minister, Canadian farmers are caught in an increasingly complex and dynamic economic landscape.

Canadian farmers' associations, including the Agricultural Producers Association of Saskatchewan and Grain Growers of Canada, have voiced deep concern over the impact of tariffs, warning of declining crop prices and extreme financial strain on farmers.

Kyle Larkin, executive director of GGC, underscored the devastating impacts of the current trade dispute, stating, "The US and China account for over half of all Canadian grain exports -- losing access or facing exorbitant tariffs in both markets at once is a threat farmers cannot afford to absorb."

Farmers are calling on the Canadian government to take immediate action to ease tensions with China and compensate farmers for financial losses incurred by the trade conflict.

Canadian wheat unlikely to be affected

Of the Canadian grains, Chinese tariffs have only been placed on canola products, sparing Canadian wheat. According to market participants, China remains too reliant on the high-protein Canadian Western Red Spring wheat to impose tariffs, given the lack of a viable alternative of comparable quality.

Canadian grains outlook for 2025

In a survey-based estimates report released by Statistics Canada on March 12, Canadian farmers intend to plant more wheat and less canola in the upcoming planting season. According to the report, wheat planting area is expected to increase by 2.6% from last year at 27.47 million tons. In contrast, canola was forecast to fall by 1.7% year over year to 21.65 million tons. Lower profitability of canola relative to other crops was cited as the primary reason for the decline.

Although the survey was conducted prior to China's tariffs announcement, these additional pressures on canola may further shift farmer planting interest toward wheat, further solidifying Canadian wheat as the more profitable option.

Shifting trade dynamics are expected to influence farmers, who would need to adjust their strategies for the upcoming planting season.

Platts, part of S&P Global Commodity Insights, assessed Canadian Western Red Spring Wheat 13.5% FOB Vancouver 30-45 days forward at $260.33/mt March 12, down $1.01 from March 11.