Canadian agricultural exports to the US may have dodged the tariffs announced by American President Donald Trump on Wednesday, but the triggering of a possible global trade war could negatively impact farm commodity prices on this side of the border regardless.
In his so-called ‘liberation day’ announcement at the White House, Trump unveiled a 10% baseline tariff on most imports to the U.S., with higher duties on other trade partners, including China and the European Union.
And while other tariffs the president previously announced are still in effect, including a 25% levy on American imports of Canadian steel and aluminum, Canada and Mexico were both spared the 10% baseline tariff. As such, any goods compliant with the US-Mexico-Canada free trade agreement signed during Trump’s first term in office will continue to see a 0% tariff.
Canadian agricultural exports to the US are compliant under the US-Mexico-Canada agreement, which generally maintains the original North American Free Trade Agreement’s provisions for tariff- and quota-free trade for most agricultural products.
However, amid the possibility of retaliatory trade action from countries hit Trump’s latest round of tariffs has already pressured US agricultural commodity markets, which serve as a benchmark for Canadian pricing. Chicago corn, wheat, and soybean markets were all trading lower this morning, with soybeans seeing the sharpest declines, down 16-18 cents/bu as of about 10:30 am ET. Cattle futures were also trading lower, but hogs were higher.
"Punitive new tariffs have spooked investors and it's weighing on agriculture, energy, and metals futures this morning," Peak Trading Research said in a note quoted by Reuters.
China, the largest buyer of US farm goods, was slammed with a 54% tariff in Trump’s announcement Wednesday and that country has vowed countermeasures that could further target soybeans and other agricultural products. In response to Trump earlier raising tariffs on imports from China, Beijing last month already slapped a 15% levy on US products like chicken, wheat and corn, as well as 10% on products like soybeans, pork, beef and fruit.
On the other side, a falling US dollar has helped cushion the tariff blow on the markets, and some analysts also pointed out the 10% baseline tariff was not as bad as originally feared.
