Donald Trump’s trade war is causing chaos for farmers and food producers on both sides of the U.S.-Canada border, as businesses grapple with how to disentangle supply chains that have been interconnected for decades.
The U.S. president slapped 25 per cent tariffs on most Canadian and Mexican goods on Tuesday, prompting Canada to respond with its own 25 per cent levies on $30 billion (US$20.9 billion) worth of products, including on orange juice, coffee and fruit.
Prime Minister Justin Trudeau has also threatened to expand that to cover an additional $125 billion in goods next month, including U.S. beef, pork and more fresh produce.
While Trump delayed the new duties on many products on Thursday, there’s still the specter they will return in April — along with, perhaps, sweeping “reciprocal tariffs” and other levies on agriculture that he has previously talked about. North America’s food industry now faces the overwhelming task of adapting to a turbulent situation of ever-changing rules.
“This is the biggest challenge we’ve ever faced and I’ve been doing this for over 20 years,” said John Nickel, a Manitoba hog producer who sells exclusively to the US. His first of two weekly shipments of piglets crossed the border tariff-free on Monday, but he doesn’t know whether a 25% markup will appear on the invoice for the animals he sent Thursday morning.
With harsh winters and short growing seasons, Canada must rely on the US for many of its fresh fruits and vegetables. At the same time, its farmers and fishers raise and catch more animals than 41 million Canadians need, so they sell to American consumers, who also represent a market that’s more than eight times larger.
The agricultural supply chain underscores Canada’s dependency on the US for exports, as well as its role in feeding Americans. But while Canada send 76% of its exports to the US, Americans rely on their northern neighbor for less than a fifth of theirs.
That means Canadian businesses and farmers will face greater challenges in finding a replacement for US demand. Meanwhile, consumers protesting Trump through a “Buy Canadian” campaign will have a hard time trying to find substitutes for all of the foodstuffs they want.
The pork supply chain involving Nickel is one example of a deeply integrated network that crosses the Canada-US border.
To go from piglets to supermarket aisles, Nickel’s breeding facilities in rural Manitoba start with the purchase of swine genetics from suppliers, allowing thousands of sows to reproduce. Every week, he exports some 3,000 piglets from two facilities near the border to be raised in Iowa and Minnesota, the top two states for US hog production.
At about six months, pigs are market-ready and shipped to processing facilities before being sold to American shoppers. Feed suppliers, equipment dealers and workers are involved throughout the process in both countries.
The US remains the only viable market for him and other Canadian producers in Manitoba, a top hog-selling province. In the billion-dollar pork supply chain, exports of live pigs are primarily done by trucks, and that limits the market reach to nearby regions.
“Over time, things can change. But it would take a long time to adjust if the US market wasn’t there. It would take years to find a different model,” Nickel said. Manitoba lacks raising and processing capacity, and farms in the US Midwest rely on facilities like Nickel’s to supply piglets. It also makes more economic sense for those farms to be in the Midwest, which is closer to major planting areas for corn, a key ingredient for feed.
Among the most popular produce, the US supplies 67% of Canada’s vegetable imports and 36% of its fruit imports, according to data from Canada Food Flows. “We really significantly depend on the US, and that reliance made sense for the longest time because of our relationships,” said Kushank Bajaj, who co-created the website as part of his research at the University of British Columbia. “There’s very little diversification in our supply chains.”
Nearly 95% of Alberta’s imported spinach came from California and Arizona in 2022, with Mexico supplying less than 3% and neighboring British Columbia providing just 1.5%. Three-quarters of its imported lettuce came from those two US states. Trying to buy only local produce would drastically reduce options for many consumers, Bajaj said, and shifting away from US imports toward other countries would take time.
For perishable foods, shipment duration and costs are some of the biggest challenges to sourcing from other countries rather than the US.
George Pitsikoulis, a Montreal-based produce wholesaler, brings in fruits and vegetables from 46 countries. If he were to call California on a Friday afternoon to arrange a shipment, two drivers taking turns driving the truck could make the delivery at his door by Monday. But if he were to order citrus from Spain, it may take three to four weeks to arrive.
For some fruit like strawberries, Florida remains the only practical source for his company because the color and look of Mexican imports aren’t as attractive to consumers. And because strawberries won’t survive container rides, buying from other countries would require air freight, which adds to costs.
“We’re right next door to this huge source for us,” said Pitsikoulis, chief executive officer of Canadawide Fruit Wholesalers Inc. “Everything is available from outside the US but there’s some sort of compromise — whether it’s quality, pricing or freshness — if we want to source from any other parts of the world.”
Since Pitsikoulis started working in the 1980s, his company became less US-reliant over the years as logistics networks grew, more countries made advancements in farming and local seasons lengthened. But the US remains the company’s biggest source of imports.
Canada’s retaliatory tariffs are already being applied to US-grown produce including citrus, peaches and tomatoes. But even if Pitsikoulis wanted to import only Mexican-grown lemons, nearly all the produce from that country would still have to travel through US warehouses before heading to Canada by trucks.
That means those lemons would face 25% duties entering the US, making it 25% more expensive even without any tariffs Canadian applied at the Canadian border, Pitsikoulis said.
Trade between Canada and the US enjoys a “proximity advantage” and severing ties will raise prices, said Sunderesh Heragu, an Oklahoma State University professor whose research focus includes supply chain management. “It’s easier said than done because you have to build supply chains that didn’t exist and partner with companies you’ve never worked with.”
The more integrated the network, the harder it is to decouple from it, according to Igor Rikalo, president of o9 Solutions Inc., a Texas-based supply chain planning firm. And while relocating facilities from one country to another can be capital intensive, skills and labor might be an even bigger problem, Rikalo said.
“It took us years to globalize, extend and integrate these very long supply chains. It’ll probably take years to shrink them down.”
Randy Thanthong-Knight, Bloomberg News
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