CALGARY, ALBERTA (RFD NEWS) — Trade tensions between the United States and Canada are escalating as both countries impose new restrictions on each other’s goods.
President Donald Trump signed a series of proclamations banning Canadian whey, molasses, alcohol, and motorcycles from importation into the United States. The proclamations also reshuffled the list of products facing 50 percent tariffs.
The proclamation says the move is partly a response to what it calls continued discrimination against the United States in dairy.
Shaun Haney, host of RealAg Radio, joined us on Wednesday’s Market Day Report to discuss the latest developments and the order, which came the same day Canadian tariffs took effect on about $20 billion of U.S. goods.
Import Bans Could Affect Dairy Trade
Haney said an outright ban on Canadian dairy products could have a different impact than tariffs.
He said the U.S. could see some short-term price benefits, noting that Class III milk futures were up following the announcement.
According to Haney, a complete ban on Canadian dairy imports would affect approximately $250 million to $360 million in annual trade.
However, the U.S. ships considerably more dairy products into Canada, with annual exports ranging from approximately $900 million to $1.3 billion.
Haney said the issue also returns to long-running concerns surrounding tariff-rate quotas between the two countries.
He noted that Canada’s dairy exports to the U.S. are primarily whey proteins, which could create additional concerns because of strong consumer demand for protein ingredients.
Whey is used in products ranging from cheese to cookies and crackers.
Uncertainty Creates Investment Concerns
Haney said the escalation is creating uncertainty for businesses and manufacturers on both sides of the border.
He said he spoke with manufacturers who are increasingly cautious about making new investments because they do not know what the trade environment will look like.
Haney also pointed to the administration’s efforts to encourage manufacturing to move into the United States, while noting the uncertainty surrounding potential restrictions on Canadian companies.
He cited Bombardier as an example, saying the company employs approximately 3,000 Americans, including about 500 employees in Wichita, Kansas.
Haney said banning Bombardier products could deter investment.
“It’s very easy to sit in a board of directors room on a corporate board and say, you know, I think we just need to pause this investment because we really don’t know what this looks like,” Haney said.
Agriculture Watches for Further Escalation
Haney said agriculture, aside from dairy and some farm machinery, has largely stayed out of the trade dispute so far.
However, he said the agricultural industry is becoming increasingly concerned about getting caught up in the escalating back-and-forth.
The biofuels industry is one area he said could be vulnerable. Canada is the largest purchaser of U.S. ethanol, according to Haney, buying about 775 million liters annually.
Canadian canola oil is also an important component of efforts tied to the U.S. 45Z program.
Haney said the highly integrated agricultural economies of the two countries mean that restrictions on one product could create consequences across the industry.
Potential areas of concern include U.S. ethanol exports to Canada, corn, beef and pork products.
“Taking one item, like say there’s some sort of challenge to U.S. ethanol imports into Canada, it creates a chain reaction of consequences that really hurts farmers on both sides of the border,” Haney said.
Haney said agricultural producers in both countries are more concerned about agriculture getting caught up in the trade dispute than they were two weeks earlier.
He also noted that food affordability is already a major issue for consumers.
Adding tariffs or bans on food products could raise costs for consumers, adding another concern as the trade dispute continues.
