The provisional rate will be set at 75.8 per cent, effective from Thursday, the Ministry of Commerce said in a statement.

Canola Council of Canada President Chris Davison said that rate makes the Chinese market effectively closed for Canadian canola, to which Canada exported almost C$5 billion of the oilseed crop in 2024.

ICE November canola futures RSX5 fell as much as 6.5 per cent to a four-month low after the announcement.

“This really came as a surprise and a shock,” said trader Tony Tryhuk of RBC Dominion Securities.

Duties could all but end canola imports

China, the world’s largest importer of canola, also known as rapeseed, sources nearly all its supplies of the product from Canada. The steep duties would likely all but end imports if they are maintained.

“This is huge. Who will pay a 75 per cent deposit to bring Canadian canola to China? It is like telling Canada that we don’t need your canola, thank you very much,” said one Singapore-based oilseed trader.

China imposed tariffs on canola oil and meal in March.

Canada is now in a trade conflict with the world’s two largest economies, as it also faces tariffs on goods from the United States. Canada’s number one canola market is the U.S., followed by China.

China’s Ministry of Commerce said an anti-dumping probe launched in September 2024 had found that Canada’s agricultural sector—particularly the canola industry—had benefited from substantial government subsidies and preferential policies.

The Canadian government and canola industry have previously rejected allegations of dumping. The industry believes China’s complaint is based on other ongoing trade and political disputes, Davison said.

A final ruling could result in a different rate, or overturn Tuesday’s decision.

The decision marks a shift from the conciliatory tone struck in June when China Premier Li Qiang said there were no deep-seated conflicts of interest between the countries during a phone call with Canadian Prime Minister Mark Carney.

“This move … will put additional pressure on Canada’s government to sort through trade frictions with China,” said Trivium China agriculture analyst Even Rogers Pay.

Canada’s trade, agriculture and prime minister’s office did not immediately respond to request for comment.

Canada has imposed tariffs on Chinese electric vehicles, steel and aluminum.

Separately, China also launched an anti-dumping investigation into Canadian pea starch and imposed provisional duties on imports of halogenated butyl rubber, according to ministry statements.

No easy replacement

Replacing millions of tons of Canadian canola is likely to be difficult at short notice, say analysts.

China uses imported canola to make animal feed for its aquaculture sector, as well as for cooking oil.

The move provides an opportunity for Australia, which looks set to regain access to the Chinese market with test cargoes this year after a years-long freeze in the trade, Pay said.

Australia, the second-largest canola exporter, has been shut out of the Chinese market since 2020 due mainly to Chinese rules to stop the spread of fungal plant disease.

However, even if Australian imports increase, “fully replacing Canadian canola will be very difficult unless import demand drops sharply”, said Donatas Jankauskas, an analyst with commodity data firm CM Navigator.

Davison said his industry believes China will need Canada’s canola to meet the sort of demand it has experienced in recent years.

“I think the expectation would be that they could not meet those needs with a quality of a product and the volume that we provide,” Davison said.

Canadian farmers take hit before harvest

Canadian farmers are about to begin harvesting canola and will not be happy to see prices plunge, said Canadian Canola Growers Association President Rick White. As long as the prohibitive duty is there farmers face suppressed prices.

“It’s going to certainly have a damping effect on price for farmers and they’re going to be stuck with that,” White said.

Commodity funds have a substantial long position in ICE canola futures, traders said, which should add fuel to the selloff fire.

“This will help accelerate their exit of that long and could really extend the losses,” said Tryhuk.

Another trader said there was already downward pressure coming into canola prices as Canada’s crop is widely believed to be bigger than many previously forecast due to good weather.

Ventum Financial broker David Derwin said traders were unsure about how to take the Chinese move yet, since it is not a final rule.

“Is it a negotiating tactic? Or does China put it in and that’s that?,” Derwin asked.

—Additional reporting by Gus Trompiz in Paris and Ed White in Winnipeg

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Trudeau said Canada would continue to engage with senior Trump administration officials about tariffs Washington says it will impose on Canadian imports, reiterating that his goal was to get the measures removed.

Why it matters: The Canadian agricultural sector is heavily reliant on exports to the U.S.

“I can confirm that we will continue to be in a trade war that was launched by the United States for the foreseeable future,” he told reporters in Ottawa.

Canada immediately imposed 25 per cent tariffs on C$30 billion of U.S. imports and Trudeau said those measures would remain in place until the Trump administration ended its trade action.

Trudeau and Trump, who accuses Canada of not doing enough to stop the flow of fentanyl and illegal migrants across the border, held a 50-minute call on Wednesday.

“It was a colorful call. It was also a very substantive call,” said Trudeau, adding that the two sides were in talks but had nothing to announce yet.

“We are … trying to make sure that these tariffs don’t overly harm, certainly in the short term, certain sectors.”

One topic of conversation is Canada possibly delaying a second round of 25 per cent tariffs on a further C$125 billion of U.S. imports, due to come into effect in less than three weeks.

Trump will exempt automakers from tariffs on Canada and Mexico for one month as long as they comply with existing free trade rules, the White House said on Wednesday.

“Any carve outs that support any workers in Canada, even if it’s just one industry or another, are going to be a good thing,” said Trudeau.

The Canadian prime minister will step down once the ruling Liberal Party chooses a new leader this Sunday. He has generally had poor relations with Trump and took a swipe at the president, who first made a name for himself as a real estate mogul.

“A win-lose between us would actually be worse for them than a win-win. That’s true in international trade, in relations between nation states,” he said.

“It perhaps is not true in real estate deals, (where) a win-lose is probably better for someone who is experienced in business deals than a win-win,” he said.

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Read more of our tariff coverage here

But it wasn’t all gloom and doom. In fact one of the key organizers, Erin Gowriluk of the Canada Grains Council struck a positive tone, noting that many of the key issues of the grain sector remain aligned throughout North America.

She spoke to Glacier FarmMedia’s Zak McLachlan from the floor of the event.

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To start, I want to discuss the theory. It’s important to note that a tariff on beef is totally different than a tariff on car parts. Demand for beef is inelastic. A small change in supply has a large influence on the price. The demand curve is steeper than the supply curve.

Consider the above diagram, which represents the supply and demand for beef. The current price is “C,” which is where the current North American supply and North American demand intersect for beef. If a tariff of 15 per cent is applied to beef, the demand curve for the Canadian producer shifts to Demand 2. The new price for the Canadian producer is “B,” which is where the supply curve and Demand 2 intersect. For the U.S. consumer, the new price is “A.” The supply and demand curves are the same; however, less product is supplied to the market, resulting in stronger demand. You can see from the diagram that the bulk of the tariff is absorbed by the U.S. consumer for a product with inelastic demand.

If the slope of the supply and demand curve is the same, the cost of the tariff is absorbed equally between the seller and the buyer (for example, steel). If the demand curve is elastic or more horizontal, the bulk of the tariff would be absorbed by the seller (e.g., wheat).

The second factor to consider is that beef is sold on longer-term contracts. Companies like McDonald’s buy beef on six- or eight-month contracts. How can a packer sell beef for September delivery when they don’t know if there will be a tariff on beef or cattle? The U.S. packer factors in a worst-case scenario when selling beef. The wholesale beef market has incorporated a risk premium due to the uncertainty in production and tariffs. At the time of writing this article, wholesale choice beef was trading at US$333/cwt which is higher than the monthly average COVID highs of 2020 and 2021.

In the short term, cattle producers are selling into a market that has factored in tariffs but there is no tariff in place. President Trump is also talking about tariffs when supplies are at modern-day historical lows. The stars have aligned because the U.S. had also closed the border to Mexican feeder cattle. The U.S. usually imports about 120,000 head of Mexican feeder cattle per month. Most politicians don’t understand international trade; hence they need advisors. In the previous Trump term, the president listened and acted on advice of advisors.

A tariff on feeder cattle will take the steam off the market, but remember, Canada is a net importer of feeder cattle so the effect for the cow-calf producer will be minimal. Don’t worry, you can sleep comfortably at night knowing a U.S. tariff on Canadian beef or cattle will punish the U.S. consumer. It takes about two or three months for the higher wholesale prices to work through the supply chain at retailers and restaurants.

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Trump signed proclamations late on Monday raising the U.S. tariff rate on aluminum to 25 per cent from his previous 10 per cent rate and eliminating country exceptions and quota deals as well as hundreds of thousands of product-specific tariff exclusions for both metals.

The measures, which will take effect on March 12, will apply to millions of tons of steel and aluminum imports from Canada, Brazil, Mexico, South Korea and other countries that had been entering the U.S. duty free under the carve-outs.

Mexican Economy Minister Marcelo Ebrard said on Tuesday that the tariff decision was “not justified” and “unfair”.

Canada’s Prime Minister Justin Trudeau called the tariffs “unacceptable”.

European Commission President Ursula von der Leyen joined the condemnation, saying the 27-nation bloc would take “firm and proportionate countermeasures”. Von der Leyen was meeting U.S. Vice President JD Vance at an AI summit in Paris on Tuesday.

The move will simplify tariffs on the metals “so that everyone can understand exactly what it means,” Trump told reporters. “It’s 25 per cent without exceptions or exemptions. That’s all countries, no matter where it comes from, all countries.”

Trump said he would follow with announcements about reciprocal tariffs on all countries that impose duties on U.S. goods over the next two days, and said he was also looking at tariffs on cars, semiconductors and pharmaceuticals.

Asked about threats of retaliation by other countries against his new tariffs, Trump said: “I don’t mind.”

Ready to retaliate

In figures likely to further irk Trump, Germany’s trade surplus with the U.S. reached a record level last year of 70 billion euros (US$72.3 billion), according to data from the German statistics office.

European Commission head Von der Leyen said she deeply regretted the U.S. decision, adding that tariffs were taxes that were bad for business and worse for consumers. EU steel exports to the U.S. have averaged about 3 billion euros (US$3.1 billion) a year over the past decade.

“Unjustified tariffs on the EU will not go unanswered – they will trigger firm and proportionate countermeasures. The EU will act to safeguard its interests,” she said in a statement.

One option for the EU would be to reactivate the tariffs it imposed in 2018 that were suspended under a truce agreed between Von der Leyen and then-U.S. president Joe Biden.

The EU tariffs on U.S. products such as bourbon, motorcycles and orange juice are currently suspended until the end of March.

The American Chamber of Commerce to the EU (AmCham EU), representing U.S. companies active in Europe, also criticized the move as harmful to jobs, prosperity and security on both sides of the Atlantic.

“The damage will extend beyond just the steel and aluminum sectors, impacting all businesses that rely on these materials throughout the supply chain,” it added in a statement.

Trump’s latest trade salvo pushed gold prices to a record high on Tuesday on safe-haven demand in Asian trading before retreating.

Canada to defend itself

Steel imports accounted for about 23 per cent of American steel consumption in 2023, according to American Iron and Steel Institute data, with Canada, Brazil and Mexico the largest suppliers.

Canada, whose abundant hydropower resources aid its metal production, accounted for nearly 80 per cent of U.S. primary aluminum imports in 2024.

Speaking on the sidelines of the Paris artificial intelligence summit, Prime Minister Trudeau said Canada would seek to highlight the negative impact of the U.S. tariffs and, if necessary, its response would be firm and clear.

“Canadians will stand up strongly and firmly if we need to,” he said.

Trump also will impose a new North American standard requiring steel imports to be “melted and poured” and aluminum to be “smelted and cast” within the region to curb U.S. imports of minimally processed Chinese and Russian metals that circumvent other tariffs.

While China exports only tiny volumes of steel to the U.S., it is responsible for much of the world’s excess steel capacity, according to the U.S. It says subsidized production in China forces other countries to export more and leads to transshipment of Chinese steel through other countries into the U.S. to avoid tariffs and other trade restrictions.

—Reporting by Steve Holland, Andrea Shalal, Jeff Mason and David Lawder. Additional reporting by Lidia Kelly in Melbourne, David Ljunggren and Costas Pitas.

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U.S. President Donald Trump’s threat to impose 25 per cent tariffs on Canada and Mexico as soon as Saturday would hurt Canada’s export-dependent economy and raise prices for goods on both sides of the border.

Canadian farm exports to the United States include millions of piglets, as well as meat and crops such as wheat, oats and soybeans.

Ontario hog farmer Stewart Skinner, who sells 95 per cent of his 40,000 pigs per year to U.S. buyers, said he has renegotiated some sales agreements so U.S. buyers take delivery of the pigs in Canada and pay the tariffs themselves when they cross the border.

“It’s the uncertainty of not knowing that forces you to completely rethink that (business) model,” said Skinner, who produces specialty hogs that have humane treatment certification required by high-end pork sellers such as Whole Foods. “The market for our pigs is in the USA, not here in Canada.”

If the U.S. imposes tariffs for the long term, he plans to stop feeding pigs to slaughter weight and to instead ship all his piglets to the U.S. Piglets sell for much less than fattened hogs, so the tariff hit is lower.

Canadian farmers and companies that sell livestock, crops and food products into the U.S. are trying to tariff-proof their businesses. Nobody wants to make a sale and be required or pressured to pay a hefty tariff, or to find U.S. buyers backing out of deals.

Canada, the world’s eighth-largest beef exporter and third-biggest pork shipper, exported C$3.5 billion of beef and C$1.65 billion of pork to U.S. buyers from January through November last year. About 2.6 million pigs are shipped annually from Manitoba alone to U.S. hog feeding operations, mostly in Iowa and Minnesota.

Canadian and U.S. cattle pass back and forth across the border at various ages.

Manitoba piglet producers are now having uncomfortable conversations with U.S. buyers about who picks up the tariff bill.

“These pigs can’t stop flowing,” said Manitoba Pork Council Chair Rick Prejet, adding that there are not enough Canadian farms to fatten piglets to slaughter weight.

Sharing tariff costs

Prejet said American farmers need Canadian piglets because there are not enough born in the U.S. That means the piglet trade will likely continue in the short term even if tariffs are imposed.

“There will have to be a negotiation between buyer and seller,” said Prejet.

The U.S. National Pork Producers Council did not respond to a question about renegotiating contracts. The council said the U.S. pork industry, which exported $875 million (C$1.27 billion) worth of pork to Canada in 2023, worked hard to establish mutually beneficial trade between the countries.

Some U.S. buyers have already pulled back from buying Canadian farm products. In December, Manitoba farmer David Laudin sold soybeans to a U.S. buyer for delivery in March.

The next day, his broker told him there would be no further sales to that buyer because he was worried about tariffs.

“He completely cut it off the day Trump announced (possible tariffs),” said Laudin.

The rest of his crop will be sold to buyers north of the border.

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The three neighboring nations, and major partners in commerce, have entered a trade tussle after U.S. President-elect Donald Trump threatened to slap tariffs on the countries to the north and the south if they did not clamp down on drugs and migrants coming into the U.S.

Mexico is working on both issues in order to “come to the table” to negotiate without obstacles, Luis Rosendo Gutierrez told outlet Inside U.S. Trade.

Since Trump’s tariff threat, Mexico has launched an offense on contraband goods from Asia coming into the country, and officials seized a record amount of fentanyl. They have also detained thousands of migrants, vowing to prevent them from making it north.

Mexican officials have been in touch with Trump allies, Gutierrez added, though they have not met with incoming administration officials. The exception is Jamieson Greer, Trump’s tapped trade representative, with whom Gutierrez met before his nomination.

Trump, as well as some U.S. industry leaders, have accused Mexico of being a “backdoor” to Chinese goods and investment, which Mexico has denied.

Screening investments

Mexico is looking to take a cue from the U.S., however, in screening investments coming into the country, Gutierrez said. Mexico is looking to develop a process similar to the U.S.’ Committee on Foreign Investment, he explained.

When asked if that would affect Chinese automaker BYD’s plans to build a factory in the Latin American country, Gutierrez responded that Mexico wants “to play with the same rules” as its trade allies.

Trump had threatened to put a 100 per cent tariff “on every single car coming across the Mexican border” in response to BYD’s plans, though the carmaker has repeatedly said its plant would serve the local market and not the United States.

Mexico is considering doling out incentives to draw manufacturing investments, Gutierrez said, suggesting Mexico could produce batteries that the U.S. wants to be made regionally.

Corn complications

Mexico is also awaiting the result of a dispute panel under the USMCA trade deal regarding Mexico’s restrictions on imports of genetically-modified corn.

Mexico will comply with the panel’s ruling even if unfavorable toward the nation, Gutierrez said. And depending on the outcome, Mexico will weigh whether it must make changes to a proposed constitutional reform that would bar the use of GM corn for human consumption, the official added.

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This is the first time the European Union has taken such action at the start of an investigation, rather than wait for it to result in trade measures against the bloc.

“The EU’s action was prompted by an emerging pattern of China initiating trade defence measures, based on questionable allegations and insufficient evidence, within a short period of time,” the commission said.

Proceedings at the WTO start with a mandatory period of 60 days for the parties to consult each other. The Commission said it would ask the WTO to set up an adjudicating panel if the consultations did not lead to a satisfactory solution.

WTO panels usually take more than a year to reach conclusions.

Later on Monday, China’s commerce ministry said it had received an EU request for consultations and expressed regret over the bloc’s WTO challenge.

Beijing’s investigation had been initiated “based on Chinese law and at the request of domestic industry,” the ministry said in a statement.

“China has a responsibility to protect the legitimate rights and interests of its domestic industries,” it added.

China initiated its anti-subsidy investigation on Aug. 21, targeting EU liquid milk, cream with a fat content above 10% and various types of cheeses.

The Commission said it was confident that EU dairy subsidy schemes are fully in line with international rules and not causing injury to China’s dairy sector.

The EU imposed provisional duties in July on electric vehicles built in China and EU members are expected to vote soon on final tariffs, which would apply for five years.

China also has ongoing anti-dumping investigations into EU brandy and pork. Earlier this month, the country announced a probe into Canadian canola after the Canadian government also announced tariffs on Chinese EVs.

—Reporting for Reuters by Philip Blenkinsop and Bart Meijer; Additional reporting by Beijing newsroom.

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“We’re in the same boat,” said Barry Coleman, executive director of the Northern Canola Growers Association.

“It’s not a situation where the Canadian grower is getting less than the U.S. grower. They’re both affected the same.”

Canadian canola futures on the ICE exchange tanked when news broke Sept. 3 that China was launching an anti-dumping investigation into Canadian canola. Prices were quickly limit-down, although the November contract stabilized above $570 after falling from $620.

At midday Monday, the ICE Futures canola market was posting solid gains as speculators covered short positions and end-users hunted for bargains.

Despite the United States not being targeted in China’s investigation, U.S. elevator prices instantly reflected the futures selloff. When it comes to canola, whatever affected Canadian values affects U.S. values, and vice versa.

“It was the exact same thing. Prices were down the same,” said Coleman.

It’s part of the reality of canola seed, canola oil and canola meal that, like most bulk commodities, individual markets can be interrupted, but global supply and demand is flexible and fluid. If one source of either is blocked, the commodity tends to flow to the next easiest place.

“People need to remember this has happened in the past,” said Jeff Nielsen, a central Alberta farmer with much experience watching international market disruptions from inside farm organizations such as Grain Growers of Canada and the Alberta Barley Commission.

Many farmers remember the dispute with China following the arrest of Huawei executive Meng Wanzhou in late 2018. Within months both Viterra and Richardson were blocked from selling to China, severely reducing Canada’s sales to China for years. The Canola Council of Canada estimates that market access loss cost Canada’s canola industry $1.54 to $2.35 billion.

However, Canadian canola flowed to other markets, so after being discounted during the dispute, Canadian canola flowed back to China at market prices soon after the dispute was resolved.

Nielsen said numerous other countries have these sorts of issues. Canada lost most of the Saudi Arabian barley market in 2018 after the Canadian government criticized the Saudi government’s treatment of political dissidents. Australia lost Chinese barley sales after offending the Chinese government. Barley flow simply shifted.

As LeftField Commodity Research noted in a report, “it’s no coincidence that Canadian barley exports jumped during this period as it overlapped with China’s excessive tariff rate on Australian barley.”

Australia’s barley exports fell to zero, but “overall Australia’s exports didn’t suffer and movement picked up to other destinations, such as Saudi Arabia, Japan, Vietnam and Thailand. Following the tariff enactment, China began swiftly scooping up Canadian barley to fill the gap.”

The Australia-China dispute was resolved in August 2023 and Australia’s exports resumed, pushing Canada back to its traditional share of the market.

Other markets get blocked for various reasons. India is infamous for import restrictions when its government feels domestic prices are too low, leaving many Canadian pulse crops suddenly seeking new homes.

The precise impact of a foreign border blockage on western Canadian prices is impossible to gauge, said broker David Derwin of Ventum Financial in Winnipeg.

“How do you figure that out when there’s 14 other factors?” said Derwin.

“It’s not just a canola story.”

For instance, he said, the China news might have seemed to knock down canola by seven per cent, which is a lot. However, that same day most other associated commodities, such as soybean oil and crude oil, fell about four per cent. A net three per cent drop on the news isn’t gigantic.

China has also previously restricted Canadian canola sales, only allowing southern ports to be used for a few years due to what the government said was a concern about spreading Canadian blackleg strains to the country’s canola-growing regions in the north.

Sometimes Canadian canola has ended up in China despite the restrictions, flowing along meandering routes of transhipment through the Persian Gulf and other third party provider regions. That comes at a discount to Canadian canola because the extra transportation takes away some of the farmgate price. However, like most commodities, where there is demand, supply will find a way.

Nielsen said he thinks Canadian farmers shouldn’t panic. The canola industry is much more developed than it was in 2018. Major new crushing capacity has been built, with more coming, so not only are canola exports more segmented today, but huge North American demand for biofuel stocks has been soaring. China doesn’t have the same hammer lock on Canadian exports as it once did.

“We’ve changed a lot in the last five years,” said Nielsen.

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There has been growing trade tension between Beijing and the West in recent weeks after Canada, the United States and the European Union opted to impose tariffs on imports of electric vehicles from China.

The inquiry will examine imports from Jan. 1 to Dec. 31, 2023, the commerce ministry said in a statement, adding that preliminary evidence and information showed dumping had taken place.

Chinese President Xi Jinping met with Spanish Prime Minister Pedro Sanchez on Monday in a bid to avoid a broad trade war.

China has already launched an anti-subsidy investigation into dairy imports from the European Union and an anti-dumping investigation into EU pork imports.

“A trade war would benefit no-one,” Sanchez said, adding he was seeking to create a level playing field in cooperation with Chinese companies.

The commerce ministry said there was a causal relationship between the dumping of Canadian imports and actual damage to domestic industry following significant rises in the imports and falling prices.

More than half of rapeseed, also known as canola, exported by Canada makes its way to China. The world’s biggest oilseed importer purchased 5.5 million metric tons of canola in 2023, valued at $3.72 billion (C$5.05 billion). Imports from Canada accounted for 94 per cent of the total.

The investigation is “fundamentally different” from the discriminatory measures taken by Canada in violation of WTO rules, a spokesperson from the commerce ministry said in a Q&A session on Monday.

Canada, following the lead of the United States and European Union, will on Oct 1 impose a 100 per cent tariff on imports of Chinese electric vehicles and a 25 per cent tariff on imported steel and aluminium from China.

The announcement of Beijing’s plan on an anti-dumping probe last week sent prices of domestic rapeseed oil futures to a one-month peak.

The investigation will start effectively immediately, and should be completed before Sept. 9, 2025, although it may be extended for another six months under special circumstances, the ministry said.

The probe will also examine the industrial damage from these Canadian imports covering the period from Jan. 1, 2021 to Dec. 31, 2023, it said.

Canadian Farm Minister Lawrence MacAulay had previously said China’s move was “deeply concerning”. China has also said it will initiate an anti-dumping investigation into some Canadian chemical products.

—Reporting for Reuters by Mei Mei Chu, Siyi Liu and Beijing newsroom.

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