China's Canola Conundrum: A Silver Lining in China's Retaliatory Tariffs Against Canada's Canola Supply Chain?

China announced hefty tariffs against Canadian agricultural and food products effective March 20, 2025. In this commentary, we explore the effects on Canada's grain handlers and the canola supply chain more broadly.

Key highlights include:
-- China's 100% tariffs will effectively lock Canadian canola oil and meal exports, valued at roughly $0.9 billion, out of the Chinese market.
-- While the tariffs will likely cause some near-term volatility and some earnings pressures, we expect the overall impact to be manageable, as we anticipate trade flows to ultimately rebalance as volumes shift to and from other geographies to satisfy global demand.
-- Canadian canola seed exports valued at approximately $4.0 billion were not included in the tariff package.
-- Chinese tariffs come at a particularly uncertain time for Canada's canola supply chain considering the potential for the Trump administration to go ahead with 25% tariffs on $7.7 billion of Canadian canola exports on April 2, 2025.

"This is a particularly uncertain time for Canada's canola supply chain. These tariffs aside, there can be no assurance that canola seed will not ultimately also be part of a Chinese trade action," said Moritz Steinbauer, Senior Vice President, Sector Lead, Corporate Ratings, Diversified Industries. "Furthermore, we have the the potential for the Trump administration to go ahead with 25% tariffs on $7.7 billion of Canadian canola exports on April 2, 2025."