China Targets Canadian Canola in Retaliation for EV Tariffs

The trade war between China and Canada has spilled into the agricultural sector, as Beijing announced an anti-dumping investigation into Canadian canola imports on Tuesday. This move comes as a direct response to Ottawa's recent decision to impose tariffs on Chinese electric vehicles, further escalating tensions between the two nations.

As reported by Reuters, China's Ministry of Commerce alleges Canadian canola is being dumped in their market, harming domestic producers. This claim comes as China's rapeseed meal prices have fallen 22% this year amidst ample domestic supply.

Canada is a major supplier of canola to China, accounting for 94% of the 5.5 million tonnes imported in 2023. This trade, valued at $3.72 billion, is now under threat, causing uncertainty in the Canadian agricultural sector.

The impact was immediate, with Chinese rapeseed meal futures on the Zhengzhou Commodity Exchange jumping 6% following the announcement. Conversely, ICE canola contracts for November delivery fell 4.7%.

This isn't the first time canola has been caught in the crossfire of the China-Canada trade dispute. In 2019, China blocked shipments from two Canadian canola exporters, only lifting the restrictions three years later.

The Chinese government also indicated it would initiate an anti-dumping probe into certain Canadian chemical products, further broadening the scope of the trade conflict.

“Canada’s canola exports to China have increased significantly...reaching US$3.47 billion in 2023, with a 170% year-on-year increase in volume and a continuous decline in prices,” the Chinese commerce ministry stated, highlighting the scale of the trade now under scrutiny.

While China explores alternative canola suppliers like Australia and Ukraine, industry analysts believe the impact on Canadian producers could be significant.