Trump Inauguration Adds to an Already Uncertain Environment for Canada's Canola Supply Chain

The second Trump administration is set to take office in the United States on January 20, adding further uncertainties for Canada's canola supply chain. In this commentary, we explore the potential effects on Canada's grain handlers and the canola supply chain more broadly.

Key highlights:
-- President-elect Donald Trump has announced his intention to impose a 25% tariff on all imports from Mexico and Canada when he takes office.
-- While Canada ships relatively little canola seed to the U.S., the U.S. is Canada's number-one offtaker of canola oil and meal.
-- The threat comes at a time when a Chinese trade probe into canola seed is already looming over the sector.
-- While there is no certainty as to when or if China or the U.S. will levy tariffs, these tariffs could have a meaningful impact on global canola trade flows and, by extension, Canada's grain handlers.

"We believe material adverse effects on the long-term credit risk profiles of most large and well-diversified Canadian grain handlers to be limited at this time," said Moritz Steinbauer, Senior Vice President - Sector Lead, Corporate Ratings, Diversified Industries at Morningstar DBRS. "Nevertheless, the possibility of U.S. and Chinese tariffs adds considerable uncertainty to Canada's canola supply chain and the implementation of tariffs could introduce significant near-term earnings volatility and pressures, potentially costing the broader industry billions."