(Calgary) Canada’s canola industry could face a billion-dollar hit from Chinese trade measures, according to a new report from an international credit rating agency.
The Morningstar DBRS report estimates the losses Canada could suffer if China’s recently announced plan to launch an anti-dumping investigation into canola seed imports from Canada results in Beijing imposing tariffs on the crop.
“While there is no certainty about when (or even if) China will impose tariffs, how severe they will be, or how long they will last, the tariffs could have a significant impact,” the report said, warning that global canola trade flows and Canadian grain handling companies could be affected.
China has historically been the largest buyer of Canadian canola seed and is expected to purchase about 70% of Canada’s canola shipments this year, according to Statistics Canada.
The decision to target canola came days after Canada announced plans to impose tariffs on Chinese-made electric vehicles, steel and aluminum.
In its report, Morningstar DBRS warned that 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.
The industry had estimated the cost of this action for the Canadian canola sector at somewhere between $1.5 billion and $2.4 billion from 2019 to 2020.
“Another punitive trade measure could prove equally costly for Canada,” the Morningstar report said.
But the rating agency said it believes Canada’s grain shipping industry is better positioned to weather potential trade action than it was in 2019 because its customer base is more diverse.
Canada has also increased its domestic canola processing capacity since then, the report notes.
Regarding China’s current investigation into Canadian canola seeds, a wide range of outcomes is possible, Morningstar said.
There could be no tariffs at all, or China could impose extremely high tariffs that would effectively stop canola trade between Canada and China for an indefinite period.