Ottawa and Beijing have unveiled the opening salvo of retaliation to President Donald Trump’s recent tariff moves – with China’s kicking in this week while Canada’s are temporarily delayed.
The ag sector features prominently in both countries’ tariff lists and while the opening moves are measured, analysts say, they offer a glimpse into what stronger actions might come later.
China’s retaliatory tariffs, which went into effect at midnight on Monday, targeted U.S. agricultural equipment as well as crude oil and liquefied natural gas, cars and pickup trucks. New duties of 10% have been applied to machinery such as sugarcane harvesters, haying machines, balers, and sorting and grading machines.
China’s Ministry of Commerce last week also imposed new export restrictions on certain minerals and lodged a complaint at the World Trade Organization charging the new U.S. duties violated international trade rules.
“Their reaction has bark, but it really doesn't have much in the way of bite,” Angie Setzer, a partner at Consus Ag Consulting, told Agri-Pulse. On the Chinese side, she continued, Trump’s tariffs have been met with cool heads.
Compare this week’s response to the Chinese countermeasures imposed after Trump’s first-term tariff hikes. Back then, Beijing imposed 25% duties on $50 billion of U.S. exports, including key agricultural commodities like soybeans, corn, wheat, poultry and beef.
Setzer was surprised that Beijing had spared U.S. agricultural commodities in the initial retaliation foray, but pointed out that “obviously, anything can change at the drop of a hat.”
Unlike China, Canada secured a last-minute reprieve from Trump’s promised 25% duties, as did Mexico. Accordingly, Prime Minister Justin Trudeau has delayed plans to impose retaliatory duties on around $108 billion.
Trudeau outlined a two-wave approach to retaliation in a press conference last month. The strategy features an initial tariff volley covering some $21 billion of U.S. exports, followed by a second tranche of tariffs covering $87 billion of U.S. exports. Mexico also has vowed to retaliate in the event the U.S. adds new tariffs but has not detailed what would be affected.
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U.S. agricultural and food products are littered throughout the list of goods that would be hit by 25% duties in the first tranche of Canadian retaliation. The duties would apply to a range of fruit, including clementines, peaches, melons and lemons, as well as dairy products – including butter, yogurt and whey products – certain vegetable oils, spices and some prepared foods.
The Chinese tariffs hit a slate of agricultural machinery for which China isn’t a major export destination. But many of the U.S. products on Canada’s retaliatory tariff list rely on the Canadian market – particularly fruit.
For fruit and vegetable producers in California, for example, Canada makes up the lion’s share of their export market, one agricultural trade analyst told Agri-Pulse.
“It's an astronomical amount of money,” the analyst said.
Trump said on Sunday that the offers from Canada and Mexico to bolster border security that earned both a 30-day reprieve from Trump’s 25% tariffs do not go far enough. The president noted that absent further actions, they would not be sufficient to keep his tariffs from coming into effect on March 1.
If both Trump’s tariffs and Canada’s pledged retaliatory tariffs go into effect, the trade analyst said, a major market for certain fresh produce would be dented.
“I don't believe there is an alternative market for a lot of these [products],” the analyst said. U.S. tomato exporters, for example, send more than 90% of their exports to Canada, according to Census Bureau data. For orange juice, the figure is above 80%. Melons, watermelons and papayas are also reliant on the Canadian market, as are citrus fruits.
No other market could fully replace export losses in the Canadian market, the analyst said. Asia imports some U.S. vegetables, but the longer travel times would cause “shelf-life issues” in the short term and the market is unlikely to fully offset export losses to Canada from tariff retaliation.
“I don't believe the domestic market can fully absorb that either,” they added.
That means the higher costs will have to be eaten by the producer, or Canadians will pay more for U.S. fruit and vegetables – which could dent sales.
The initial wave of retaliatory tariffs will make fruit producers uneasy. But overall, the initial response from Ottawa has been restrained, analysts said. If Canada really wanted to hit U.S. agricultural producers, Trudeau’s government could have gone much further.
The tariffs on tomatoes in the opening retaliatory list, for example, are limited to certain growing windows. Further, duty hikes on U.S. dairy exports only apply to export volumes above the U.S. tariff-rate quotas, which the U.S. does not hit.
“I felt like it was a measured response from Canada,” Becky Rasdall Vargas, senior vice president for trade at the International Dairy Foods Association, told Agri-Pulse. Some products in the first wave of tariffs don’t have import quotas, like casein and liquid whey, Rasdall Vargas said, but Canada could have inflicted much more pain on U.S. dairy producers, if desired.
A firmer response could still materialize
The list of products that would be included in a second round of retaliatory tariffs affecting some CA$125 billion in U.S. exports has not been published yet. In a statement announcing the retaliation strategy, however, Canada’s Department of Finance suggested that dairy products, as well as more fruit and vegetables, beef and pork, would be among the industries affected.
Becky Rasdall Vargas, senior vice president for trade at the International Dairy Foods Association.“I would certainly expect the second list to have a full range of dairy products – in-quota as well,” Rasdall Vargas said. “You always want to try to be in a position to pivot, but Canada is our No. 2 market,” she added. Steep new duties on a market worth more than US$8 billion is “not something you can just cope with without a little bit of pain.”Similarly, in the fruit and vegetable sector, a host of products could face higher duties in a second wave of retaliation that would deal a significant blow to U.S. producers. The trade analyst said leafy greens is one area they’re watching, given the dependency of U.S. growers on the Canadian market.
Setzer will also be watching for any future tariffs on U.S. ethanol.
“Canada is the largest importer of U.S. ethanol, or at least has been,” she said. “We've kind of grown accustomed to having a decent market structure up that way.”
But other industries are skeptical that Trudeau’s government would use its second wave of duties to go after products for which it heavily depends on the U.S.
Canada is the third-largest export market for U.S. soybean meal, for example, buying more than $660 million in 2024, according to USDA’s Foreign Agricultural Service.
“They don't want to harm their farmers or their livestock production by suddenly having their costs go up,” a seed oil industry source said. They pointed out that the first wave of duties hit sunflower and safflower oil exports – which Canada does not currently import in high volumes.
In Beijing, stronger measures could also be on the horizon. Trump was supposed to talk to Chinese President Xi Jinping last week – before the Chinese retaliatory tariffs came into effect. China was reportedly preparing a proposal that would serve as an opening bid for negotiations with Trump’s White House, according to the Wall Street Journal; restoring the phase one deal was a focal point of that gambit, the reporting said.
That phone call was postponed, however.
Setzer noted that the fact Trump and Xi have still not spoken a week after the U.S. tariffs went into effect is “a bit worrisome,” and could indicate a more protracted spat between the countries.
The U.S. president also announced new duties on steel and aluminum on Monday.
On its own, Setzer said, a steel and aluminum tariff wouldn’t “be the straw that breaks the camel’s back" for China. But with further tariff announcements slated for this week and in the coming weeks, the tariff actions could soon stack up.
Trump has previewed new sector-specific tariffs on pharmaceutical products, semiconductors, and oil and gas. He said last week that a “reciprocal” tariff on countries that apply higher tariff rates to U.S. exports than the U.S. levies against their products could be announced as early as this week. In his executive order implementing the new Chinese tariff last week, the president also included language that allows him to increase the tariff in the face of any retaliation.
It's easy to see how a conflict could quickly heat up and elicit a firmer response from Beijing.
“Maybe it doesn't escalate [and] it's just a low simmer,” Setzer said. But she added, “there are worries that Trump's going to continue to push it.”
