Tariffs will force Canada to defend against U.S. competition: producers
“What we’re looking at here is substantive instability in the world market”
MONTREAL — New Chinese retaliatory tariffs on U.S. goods will cause global disruptions and force Canadians to defend their markets against heightened American competition, say soybean and meat producers.
China announced tariffs Wednesday against U.S. plans to apply US$50 billion worth of tariffs on 106 imports by issuing a list of U.S. goods including soybeans, whisky, beef, industrial chemicals and small aircraft in the escalating dispute.
That’s on top of import charges announced Monday on 128 items including fruit, nuts, pork, ginseng, wine, steel pipe and aluminum scrap in retaliation for an estimated US$3 billion in U.S. tariffs on steel and aluminum.
Soy Canada executive director Ron Davidson says the latest 25 per cent levy on U.S. goods could create some opportunities for Canadian exporters, but will also force Canada to fend off imports at home and defend sales to 69 other markets.
“What we’re looking at here is substantive instability in the world market while we try to sort out where everybody’s beans are going,” he said in an interview.
Davidson said Canadian exporters including Richardson International Ltd., Cargill Ltd. and Viterra Inc. wouldn’t want to hurt long-term connections with foreign markets just to sell more to China.
China is a massive importer and uses soybean meal for livestock production.
Canada sold nearly five million tonnes of soybean products valued at $2.7 billion to China last year.
It is the country’s largest export market, but Canada is a small player compared with global leaders like Brazil, the United States and Argentina.
Brazil supplied about half of the nearly 100 million tonnes of soybean imported by China last year. The U.S. shipped some 33 million tonnes.
The group representing Canada’s beef and pork producers sees big growth opportunities in China and Asia, but says a ramp down of American exports to China would boost competition with them in other markets.
“The tariff certainly changes the landscape a little bit, but China still remains a very viable market for Canadian exports,” said Marcus Mattinson, spokesperson for the Canadian Meat Council.
Canadian red meat exports to China surged to $835 million in 2016, up from $334 million in 2010.
The country accounts for about 13 per cent of total Canadian exports.
A pilot project announced in December that would allow China to accept Canadian chilled beef and pork provides another window of opportunity for Canadian producers, he added.
On top of that, the rebooted Trans-Pacific Partnership could facilitate the enhanced penetration into Pacific Rim countries.
Mattinson said meat producers are monitoring the trade dispute between the world’s two largest economies.
“But we will continue to work with our government stakeholders and partners to make sure that Canada’s meat supply chain continues to benefit from international trade.”
Meanwhile, Davidson said replacing U.S. soybeans will be challenging because Canada doesn’t have the extra volume even though it is the fastest-growing field crop in the country.
Some Manitoba soybeans are available for export, but they’re being held up by a rail backlog that has slowed transportation of western grain.
Greg Colman of National Bank Financial said the tariffs against U.S. goods could increase demand for agriculture from other countries.
“The likely outcome for Canadian farms is mildly positive” he wrote in a report.