Canada-China trade tensions threaten global rapeseed market stability

The rapeseed (canola) market faces serious disruption as trade tensions escalate between Canada and China. Canada, the global leader in canola exports, implemented aggressive tariff measures targeting Chinese imports. In October 2024, Canada imposed a 100% tariff on Chinese electric vehicles and a 25% tariff on steel and aluminum from China. It plans to further extend tariffs to solar panels, critical minerals in early 2025, and semiconductors, permanent magnets, and natural graphite by 2026.

China responded firmly by imposing tariffs exceeding CAD 2,6 billion on Canadian agricultural and food products, effective from March 20, 2025:

Heavy impact on Canadian canola exports

Canada dominates the global canola trade, accounting for 42% of worldwide canola seed exports, 52% of canola oil, and 59% of canola meal exports. Therefore, China's tariff measures could severely disrupt this market, recalling the severe disruption experienced during the 2019 dispute. Back then, China suspended canola imports from Canada citing phytosanitary reasons—likely a reaction to geopolitical issues. Consequently, Canadian canola exports to China plummeted by 70%, and domestic prices dropped 10-15%.

Farmers were forced to pivot away from canola, planting alternatives such as barley, wheat, and flax, leaving significant surpluses of canola domestically. It took years for Canada to regain the lost market share in China.

Tariff impact: Long-term implications

The current trade dispute threatens to replicate the turmoil experienced in 2019. China's tariffs on canola oil and meal will reduce Canada's exports significantly, likely causing another surplus. This scenario could depress prices, forcing Canadian farmers to again seek alternative crops.

Ultimately, analysts expect a resolution through negotiations and diplomatic concessions, typical in trade conflicts. However, the pace at which the involved countries reach agreements will determine the severity and duration of disruptions to the global canola trade. The longer negotiations drag on, the deeper and more lasting the damage to farmers, exporters, and global market stability.