Rising Geoplitical Tensions Show Why Canada's Agri-Food Trade Strategy Needs To Change

(MENAFN- The Conversation) Canada's agricultural exporters are under pressure from trade disputes on multiple fronts: tariff disputes with the United States and China and diplomatic friction with India and Saudi Arabia, to name a few.

Canada is one of the world's leading producers and exporters of agri-food products, and the sector contributed $149.2 billion of the country's GDP in 2024. Since Canadian agricultural producers and food processors rely extensively on exports, the growth and sustainability of the sector depends heavily on international market access.

Trade tensions are disrupting supply chains, increasing transportation and logistics costs and generating instability in these international markets.

Businesses are being forced to reconsider their supply chain dependencies and export strategies. For a highly trade-dependent economy like Canada's, the stakes are significant.

Canada's heavy reliance on the U.S.

The U.S. is Canada's most important export destination, accounting for approximately 62 per cent of agri-food exports and more than half of Canadian imports.

The two countries share the world's longest border, similar consumer preferences, integrated supply chains, common language and membership in the Canada-United States-Mexico Agreement. These similarities reduce trade and transaction costs, making the American market highly attractive for Canadian businesses.

For many Canadian firms in the agri-food sector, exporting to the U.S. is the most efficient and profitable international strategy.

But this high level of dependence also creates vulnerabilities. U.S. President Donald Trump's tariffs and protectionist policies demonstrate that even long-standing economic relationships are vulnerable to political disruption.

No commodity illustrates the volatility of single-market dependence more clearly than canola.

Read more: Trump's tariff threat could shake North American trade relations and upend agri-food trade

China, Canada and canola diplomacy

China accounts for more than 60 per cent of Canada's canola seed exports. Canola exports to China were relatively stable until 2019, when they declined sharply amid rising diplomatic tensions following the December 2018 arrest of Huawei executive Meng Wanzhou. Exports fell from about five million metric tonnes in 2018 to 1.5 million metric tonnes in 2019.

Trade recovered, and by 2024 canola exports to China had climbed to nearly six million metric tonnes. But they fell again to about two million in 2025 after China imposed a 100 per cent surtax on Canadian canola in retaliation for Canada's equivalent tariff on Chinese electric vehicles.

In January 2026, Prime Minister Mark Carney visited Beijing, the first such trip by a Canadian prime minister since 2017. The visit helped ease the tariff dispute.

On March 1, China suspended its 100 per cent tariffs on Canadian canola meal and peas through to the end of 2026. This came in response to Canada lowering its 100 per cent tariff on electric vehicle imports from China to 6.1 per cent. Ottawa also expects ⁠Beijing to lower canola seed tariffs to a combined rate of about 15 per cent from 84 per cent.

The partial opening is welcome news for Prairie producers. But making inroads into the Chinese market should not make Canadians complacent. Canada must not repeat the mistake of becoming over-dependent on the Chinese market.

The role of economic diplomacy

Canada's canola experience underlines why economic diplomacy is an important trade tool. It involves the use of diplomatic engagement to protect and advance national economic and commercial interests abroad.

Although free-trade agreements are important, they don't guarantee export growth. Non-tariff barriers imposed on Canadian agri-food products have political and regulatory dimensions that require state-to-state negotiations to resolve. Bilateral diplomatic engagement is what eventually produced tariff relief on canola.

Economic diplomacy is not only about signing trade agreements. It also involves preserving market access, resolving disputes, supporting exporters and identifying new opportunities in emerging markets.

For economic diplomacy to be effective, it must involve close collaboration between governments and the private sector. Businesses often face market-specific barriers and regulatory challenges in foreign markets, making it essential for governments to incorporate private sector concerns into their strategies.

Canadian embassies and trade missions can reduce the information costs firms face when entering foreign markets by providing market intelligence, identifying business opportunities, facilitating connections and helping firms navigate foreign regulatory systems.

Trade disputes at both multilateral and regional levels have also become increasingly common. Within the framework of the World Trade Organization (WTO), Canada ranks among the countries most frequently involved in adjudicated WTO trade disputes.

Avoiding the next over-reliance

A major priority of the Canadian government should be to deepen and expand Canada's market access globally. That requires a comprehensive strategy combining export diversification, economic diplomacy and investment in domestic productivity.

Investment in innovation, infrastructure, digital technologies, research and development and workforce skills will help Canadian businesses lower production costs, improve product quality and remain competitive despite rising trade barriers. Productivity growth is, in this sense, a trade strategy as much as a domestic economic objective.

Canada must also continue strengthening its trade relationship with the U.S. while expanding trade relations with countries in Europe, Asia beyond China, Africa and Latin America. The goal is to ensure no single partner's political decisions can destabilize Canada's agricultural economy.

In an increasingly fragmented global economy, improving market access, enhancing trade resilience and supporting the international competitiveness of Canadian businesses are essential for sustaining long-term economic growth and prosperity.

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