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CALGARY — Canada’s canola industry could take a $1-billion hit in the wake of Chinese trade actions, according to a new report from an international credit rating agency.
The report from Morningstar DBRS estimates the potential losses Canada could incur if China’s recently announced plan to launch an anti-dumping investigation into canola seed imports from Canada results in China levying tariffs on the crop.
“While there is no certainty on when (or even if) China will levy tariffs, how meaningful they could be, and for how long they would remain in place, the tariffs could have a meaningful impact,” the report stated, warning both global canola trade flows and Canadian grain handling companies could be affected.
China has historically been the biggest buyer of Canadian canola seed and was expected to purchase about 70 per cent of Canada’s canola shipments this year, according to Statistics Canada.
The move to target canola came days after Canada announced a plan to impose tariffs on Chinese-made electric vehicles, steel and aluminum.
In its report, Morningstar DBRS warned the economic impact could be similar to the last time China took a canola-related trade action against Canada. At that time, China blocked shipments of canola seed from two major Canadian companies.
Industry estimates peg the cost to the Canadian canola sector of that action at $1.5 billion to $2.4 billion between 2019 and 2020.
“Another punitive trade action could prove to be equally as costly for Canada,” the Morningstar report stated.
But the credit rating agency said it believes the Canadian grain hauling industry is better positioned to navigate a potential trading action than it was in 2019, because its customer base is more diversified.
Canada has also increased its domestic canola processing capacity since then, the report noted.
When it comes to China’s current probe into Canadian canola seeds, a wide range of outcomes is possible, Morningstar said.
There could be no tariffs at all, or China could levy extremely high tariffs that effectively stop canola trade between Canada and China for an unknown duration.
This report by The Canadian Press was first published Sept. 5, 2024.
Amanda Stephenson, The Canadian Press