Tariffs and Trade in the Agriculture Industry

With every week bringing more news of tariffs, between Canada, America, and the rest of the world, Dr. Rick Barichello sheds some clarity while we wait for the dust to settle. At the time of this interview, the United States of America had just imposed a 25% tariff on a number of Canadian goods, including agricultural products.

“It’ll be quite damaging to many of our Canadian producers,” Barichello said. “The tariff is added onto the cost of exports going into the US, which drives up the within-US price of our products.”

Normally, the cost of tariffs is split, with consumers paying more to purchase and producers making less in sales. This mix can vary, but we know historically that most of the burden transfers onto the consumer.

An Integrated Supply Chain

Trade between Canada and the US has been so heavily integrated, that sometimes a finished product will have crossed the border four times before landing in grocery stores. A calf born in Canada could be exported to the US to grow to a certain size on a feedlot. Then, it could travel across the country to finish growing at another location. Eventually, that same cow could travel back to Canada for slaughter, and be sent back to the US to be butchered into portions for consumers. This is all based on relative costs, not at random.

The livestock industry was set up this way to allow producers to specialize in certain sections of the supply chain. Transportation costs in North America were low, and crossing the border was relatively painless. Now, the industry will be hit hard with tariffs, likely at several steps, and if they continue, the underlying business plans will have to be re-considered.

However, there are some sectors that will be minimally affected by the tariffs. Dairy and poultry are relatively immune, because Canada does not significantly export or import these products. This is due to massive barriers to trade, initially set up by the Canadian government to protect these industries.

Alternative Trade Partners

While the world waits to see America’s next move, alternative trade partnerships are being strengthened elsewhere.

“We could pivot to Asia or Europe, but nothing is as easy or as low cost as selling to the US,” Barichello said.

“We could pivot to Asia or Europe, but nothing is as easy or as low cost as selling to the US”

– Dr. Rick Barichello

Many prairie farmers do have a choice in which crops to plant. Canada’s trade prospects for wheat and pulses remain fairly strong. Canada is the world’s largest exporter of lentils, with most of the $2 billion in exports sold to the largest importer in the world, India. Canadian farmers are now choosing which crops to plant for the coming year deciding among wheat, canola (normally $5 billion in exports to the US, but now with heavy tariff risks), and lentils destined for Asia.

However, pivoting into new markets, such as meats, is not so easy. Other countries have different tastes that affect how food is grown, raised, and processed. Barichello singled out Australia as a successful beef exporter to Japan and Korea and modified their exported products by asking their Asian buyers, ‘how would you like it?”

This adaptation to selling into new markets involves reshaping our supply chains. But that is not the only challenge. The remarkable level of ‘maintained uncertainty’ that characterizes Trump trade policy is itself a US ‘tax’ facing trade-oriented Canadian agriculture. We can no longer predict US trade policies as we did in the past, based on what is in the US’s best interests.

A Silver Lining

Barichello emphasized one silver lining in this trade war.

“The threat of US tariffs is not going away, so we’re being forced to be more competitive, in addition to diversifying our export markets” Barichello said. “The forestry industry is moving into mass wood, an engineered wood product that can compete with concrete and steel. We also will benefit from that type of innovation in our agriculture, to develop new markets, improve the supply chain and better connect with local suppliers of Canadian agricultural products.”

Demand for Canadian products has even encouraged innovation within UBC. Barichello has worked with undergraduate students who are excited to build platforms that connect small businesses and local suppliers.

“This is a reshaping of the supply chain,” Barichello said. “And offers the potential for much positive change.”

“Whis is a reshaping of the supply chain, and offers the potential for much positive change.”

– Dr. Rick Barichello

The effects of US tariffs on Canadian consumers

Will this tariff war be reflected in higher inflation for consumers in Canada? First, US tariffs will raise food prices in the US. But for most of Canada’s agricultural and food products, it is complex. Will US tariffs continue? If they do, they may move Canada’s prices modestly upwards if we can soon export to other markets readily. Wheat is such an example. But for canola, beef and hogs, where the US market is much more important as a share of our exports, their prices will fall in Canada unless other markets can be found for these commodities that can sustain pre-tariff prices. Even this prediction can be overwhelmed by changes in world commodity market prices: Canola CAD prices have jumped in the past two months and canola is now selling for 20% more than the 2024 average.

In terms of retail food prices, the most recent inflation data in Canada shows that food prices in grocery stores rose by 3.8 percent (April 2025) compared to April 2024, and the March number was almost as large (3.2). Meanwhile overall inflation rose by only 1.7 percent. This recent divergence between overall inflation and food price increases comes as a surprise, especially when in the US, April 2025 comparable food price inflation was only 2.0 percent. As for agricultural commodity prices, it is very difficult to anticipate food price growth (from month to month, even year by year), much less attribute recent food price increases in Canada to new US tariffs.

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