LILLEY: Carney's canola tariff dilemma

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When China slapped Canadian canola seed with a 75.8% tariff last week, the price immediately dropped more than $1 per bushel. While it’s still trading higher now than the 10% price drop in March after China’s first round of tariffs, it’s still a drop farmers will feel.

China’s latest canola tariffs are in retaliation for Canada imposing 100% tariffs on Chinese-made electric vehicles and 25% tariffs on Chinese steel and aluminum. 

The obvious answer to getting China’s tariffs lifted on Canadian canola products is to lift our tariffs on EVs, steel and aluminum. The problem is, while the idea sounds sensible and simple, it’s not that easy. 

In many ways, Canada is stuck between two economic giants involved in their own trade war. The Americans, under then-president Joe Biden, asked Canada to impose tariffs on Chinese goods. The claim is that these products are all heavily subsidized and dumped into North America to undermine our industries, harming our workers. 

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While these tariffs came from Biden, Trump has left the American tariffs on these products in place. Any move to drop the tariffs on Chinese goods could have the impact of the United States imposing more tariffs on Canadian exports headed south. 

The problem for canola farmers, and this will give them no comfort, but canola is simply a product China likes to target in any dispute with Canada. 

For three years, starting in 2019, China had a ban on Canadian canola. That was in response to the arrest in Vancouver of Huawei executive Meng Wanzhou at the behest of the Americans in December 2018. 

China would go on to also kidnap two Canadians and hold them hostage, but on trade, they hit canola. 

In 2017, China began to complain that Canadian canola quality wasn’t high enough and they slapped tariffs on seed exports.  

Let’s be clear: These Chinese tariffs on canola should be removed but given China’s past behaviour, there is no guarantee they would reciprocate. We could end up in a scenario where we remove our tariffs on Chinese goods, the United States places tariffs on more Canadian goods and China leaves their tariffs in place. 

Why would they do that? 

In order to obtain greater concessions from the Carney government, to try and encourage them to move Canada closer to China and away from the United States. This is what I mean about being caught in the middle of a bigger trade war between China and the United States. 

I understand the argument that the canola industry is strong, established, worth $40 billion and employs around 200,000 people while the EV sector is just starting to get off the ground. Allowing China to dump their vehicles into Canada, charging half the price it costs to make them, would seriously injure our entire auto industry, though not just the nascent EV sector. 

The tariffs Canada has imposed also extend to Chinese steel and aluminum though China is dumping their product, hurting our existing and vital steel and aluminum industries. 

China is simply a bad player, an untrustworthy trader and a market we should try not to rely on for any of our exports. 

Prime Minister Mark Carney has spoken often about diversifying our markets away from the United States; we should be doing the same with China. Replacing China would be difficult, but not impossible if markets like Japan, South Korea, India and Mexico were developed. 

That’s a long-term solution for the next time China takes aim at our canola famers. In the meantime, there is simply a frustration across the Prairies that the Carney government favours Ontario and Quebec and doesn’t care about them. 

That isn’t helped by Carney’s lack of action on this file. 

There may not be many good options but doing nothing is likely the worst option.