China hits back at Canada with fresh agriculture tariffs

China has imposed tariffs on $2.6 billion worth of Canadian agricultural products in response to Canada’s previous import duties. The new tariffs, effective March 20, target key exports like rapeseed oil, pork, and aquatic products.

The tariffs, which will take effect on March 20, mirror Canada's own 100% and 25% import duties imposed on Chinese-made electric vehicles, steel, and aluminum in late 2023. While China has excluded canola (rapeseed), one of Canada’s top agricultural exports, it is seen as a gesture that could leave the door open for potential trade talks. However, the new tariffs also serve as a stark warning, particularly in light of the Trump administration's potential softening of trade restrictions on Canada and Mexico, contingent on their alignment with U.S. policy.

China's Ministry of Commerce condemned Canada's measures, calling them “a typical act of protectionism” that violates World Trade Organization (WTO) rules and harms China’s legitimate interests. The newly imposed tariffs include a 100% levy on Canadian rapeseed oil, oil cakes, and pea imports, totaling over $1 billion, as well as a 25% tariff on aquatic products and pork worth $1.6 billion.

Dan Wang, Director of China at Eurasia Group, noted that the timing of the tariffs may signal China’s intention to remind Canada of the consequences of aligning too closely with U.S. trade policy. Wang suggested that China’s delayed response was a result of both its internal capacity constraints and strategic considerations in managing disputes with the U.S. and the European Union.

Despite the punitive nature of the tariffs, analysts believe the omission of Canadian canola from the list of affected products could indicate a willingness by China to leave space for diplomatic negotiations. The ongoing anti-dumping investigation into Canadian canola, launched by China in September 2023, may also play a role in China’s decision to avoid further escalation at this time.

China remains Canada’s second-largest trading partner, trailing the United States. In 2024, Canada exported $47 billion worth of goods to China, according to Chinese customs data. However, sectors like pork and canola face specific challenges due to the lack of alternative markets for certain products. Canada’s pork industry, for example, heavily relies on China for certain cuts, including heads, which do not have easy access to other markets.

With Canada’s national elections slated for October 2024, some analysts speculate that China may hope for a shift in political leadership that could lead to a more amenable stance on trade. This mirrors China’s approach toward Australia, where a change in government in 2021 led to a reset in bilateral relations following a series of retaliatory tariffs and bans imposed by China in response to Australia’s call for a COVID-19 origins investigation.

While China’s tariffs on Canadian goods are likely to have significant economic repercussions, both countries are expected to continue navigating these complex trade dynamics, with potential for future negotiations to de-escalate tensions.

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