Canada-China truce to bring relief for agricultural exports with caveats

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Chinese tariffs imposed mid-August had an immediate effect on canola seed exports to China, falling effectively to zero in September and October 20251. They fell 60% from January through October last year compared to 2024.

However, not all the decline in canola product exports reflects weaker shipments to China. Roughly one-third of the overall drop in canola products came from lower exports of canola oil, primarily to U.S. buyers.

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There were already signs Canadian exporters were finding alternative markets for canola seed directly impacted by China’s tariffs. Exports of canola seed to countries other than the U.S. and China more than doubled in 2025 to October from a year earlier, helping to partially offset export losses from the Chinese market.

Interestingly, the share of total Canadian canola seed exports to China had already fallen from just under 80% in September 2024 to less than 50% in the months following Canadian tariffs on Chinese EVs and metals—suggesting crop marketers (correctly) were anticipating increased risks that tariffs on canola could follow.

Exports to China for other tariffed goods, including seafood and pork, have also declined materially – by 31% and 19%, respectively, in 2025 up to October from a year earlier. But, export losses for these goods have been offset by stronger exports to other markets.

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Canadian canola competes in a global marketplace—and it is still not clear that a buyer in China will be more willing to pay a 15% tariff than a 75.8% tariff when canola is available from other countries on tidewater at global prices without tariffs. But, early evidence is positive that alternative markets can be found for displaced Canadian canola, and potentially quite quickly.

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At first glance, the scale of the concession appears relatively modest. At a quota of 49,000 units, Chinese EVs would account for slightly less than 3% of vehicle registrations in the year ending Q3 2025. If the quota rises to around 70,000 units over the next five years, imports will still represent less than 4% of total annual vehicle sales.

But, the reduction in tariffs serves as a reminder the Canadian manufacturing sector does not only face threats from U.S. trade disruptions, but also from competitive pressures from offshore manufacturing powerhouses like China.

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The proposed truce is expected to deliver near-term relief for some Canadian exporters, but tariffs on canola meal, lobster, crab, and peas are only guaranteed through the end of 2026, raising questions about the durability of the move. Tariff removals on canola oil or pork products were also notably absent from the announcement.

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