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American farmers are bracing for the impact of new tariffs exchanged between the U.S. and Canada on both their supply costs and their sales.
President Donald Trump's administration placed new 50% tariffs on around $20 billion worth of Canadian goods after trade talks between the two countries fell apart in late August. Canada came back with their own list of equivalent import taxes on American goods that go into effect on Tuesday.
Amid a barrage of social media posts criticizing the United States' northern neighbor, Trump claimed Americans "don't need Canada."
But Jayash Paudel, associate professor of economics at the University of Oklahoma, said trade data tells a different story — especially for farmers and agriculture-related manufacturers.
He pointed out that Canada bought $28 billion in U.S. agricultural goods last year, making it the second largest export market behind Mexico.
"It's not really about winning or losing here," Paudel said of the latest tariff exchange. "I think ultimately the heat is going to be felt by Americans."
Dairy products are a central part of both tariff lists, including everything from finished cheeses to ingredients like whey.
Karen Gefvert, chief policy officer for Wisconsin-based Edge Dairy Farmer Cooperative, said the dairy supply chains between the two countries are tightly interwoven. She said both processors and farmers will feel the pain if sales to Canada are slowed or canceled.
"We'll have more product domestically than we can consume, because those export markets take time (to develop)," said Gefvert, whose cooperative represents farms across the country. "That backup of the supply chain is real, and that will have a negative effect on price."
By comparison, prices are likely to rise for equipment that producers need for farming and processing food, like harvesters and machines used to clean eggs, thanks to tariffs from both countries.
Canada is a critical producer of steel and aluminum for the U.S., and materials often cross back and forth over the border as they travel through the supply chain, according to Paudel.
"A tariff can hit the same component more than once," he said. "It ends up raising the machinery cost for American farmers, even though the tariff is Canadian."
The Trump administration previously moved in June to lower U.S. tariffs placed on equipment made from steel, aluminum and copper. But industry experts have expressed doubt that the cut would be enough to keep the cost of farm equipment from increasing.
Milk prices already down
The threat of lost sales and lower milk prices comes as the U.S. dairy market is already navigating a long-term price slump.
Gefvert said dairy producers have turned to alternative streams of income, like raising beef cattle, to get through the period of weak prices. But she said the industry needs to expand exports, either to existing markets or new ones, in order to turn things around.
"This kind of sets us a little bit backward," she said of the new tariff exchange.
But some in the dairy industry are hoping the tariff pain could be worth it if the Trump administration is able to hold Canada to their previous commitment to increase export opportunities under the U.S.-Mexico-Canada Agreement.
Canada's dairy market is tightly managed through a quota system, and American exporters have long complained that the country has skirted their promises of opening up the market to more U.S. products.
Krysta Harden, president and CEO of the U.S. Dairy Export Council issued a statement before Canada's tariff announcement, thanking the Trump administration for "standing up" for the American dairy industry "who have waited far too long for Canada to live up to its promises."
"Canada has had plenty of chances to fix its unfair market access practices and close the loopholes it's used to dodge its dairy commitments under USMCA," Harden said, adding that the new round of tariffs "makes clear that patience has run out."
Gefvert agrees that ensuring Canadian officials follow through on their promises of better market access is critical to moving trade talks forward.
But she said what dairy producers want first and foremost is the return to a predictable marketplace.
"Stability provides certainty to businesses and industry to know where things are at and know that there's a sure plan on where things are going," Gefvert said.
Key source of fertilizer
Paudel said keeping trade with the country's northern neighbor open is also critical to maintaining crop farmers' access to a common fertilizer called potash.
The potassium-based fertilizer improves crop yields in combination with products containing phosphorus and nitrogen. Canada is the world's largest producer and exporter of potash, according to industry group The Fertilizer Institute, and approximately 85% of potash used in the U.S. comes from Canada.
The Canadian Press reports that Ontario Premier Doug Ford has called on the country to consider taxing exports of potash and other critical products as leverage against the U.S. But other Canadian leaders have pushed back on the suggestion.
While Paudel acknowledged an export tax would likely be a last resort for Canadians, he said the impact would be devastating for American producers who are already paying higher nitrogen fertilizer costs due to the war in Iran.
He said the most immediate impact of tensions between the two countries is likely the uncertainty it casts as farmers try to make plans for next spring.
"Any kind of trade policy uncertainty, it's going to directly affect agricultural decisions before even any tariff has actually taken effect," he said. "I also think about postponing equipment purchases and making operating loans, that's harder to size. These are tangible agricultural decisions that happen at the farm level."
This story was produced in partnership with Harvest Public Media, a collaboration of public media newsrooms in the Midwest and Great Plains. It reports on food systems, agriculture and rural issues.
