Although United States President-elect Donald Trump won’t be sworn in until Jan. 20, he made a big splash in the markets during the week of Nov. 25.
Trump stated on social media that his administration will impose 25 per cent tariffs on all goods imported by the U.S. from Canada and Mexico. As well, Trump said he will levy 10 per cent tariffs on imports from China on top of what the U.S. already charges.
Going after your country’s three largest trading partners might not be a smart move, but the president-elect certainly knows how to garner attention by creating turmoil.
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It’s questionable how serious Trump is on these tariffs. While he could have no qualms about imposing them, he could also be open to negotiation. Lobbying efforts are apparently underway to get some kind of exemption for canola oil, as the U.S. is Canada’s biggest foreign customer.
But there’s another problem: what will the Trump administration do when it comes to the U.S. biofuel industry? The tax credit that biofuel makers already receive is up for renewal. It’s uncertain if it will continue, be replaced by something favouring the American farmer, or eliminated.
Despite strong foreign and domestic demand for U.S. soyoil, prices on the Chicago Board of Trade took their own tumble last week. What should have been days of sizeable increases were instead a series of losses, all because of the uncertainty hanging over the industry.
That meant more pressure on canola futures at the Intercontinental Exchange. As with U.S. soybeans, Canadian canola should be riding high on a domestic crush working at capacity and exports running at a pace beyond the country’s supply. But with a single blurb on social media, Trump turned a rosy outlook into a muddled mess.
This doesn’t even account for what China could still do to Canadian canola. Although federal agriculture minister Lawrence MacAulay travelled to China, neither the Canadian nor Chinese government has publicly issued the slightest indication of what’s happening.
With canola already laid low by Trump, will there be a second blow from China? It threatened to impose punitive measures even before its investigation into alleged canola dumping by Canada has wrapped up, but it remains silent.
One source of bullish news for canola could come from Statistics Canada on Dec. 5 with its principal field crop report. There’s wide belief in the trade that the 2024/25 canola harvest will be below the 18.98 million tonnes estimated by StatCan in September. How low does it go is the question.
A bigger drop will tighten canola supplies and require price rationing.
