China’s retaliatory tariffs on Canada: For some Canadian pork and seafood producers, misfortune doesn’t come alone

On Saturday, China announced additional tariffs on Canadian agricultural and food products. Effective March 20, 2025, canola oil, oil cakes, and peas imported from Canada will face a 100% tariff,1 while imports of some Canadian pork and seafood products, including clams, crabs, lobster, prawns, and shrimp, will incur a 25% tariff. This move follows China's investigation into Canada's trade practices that was launched in August last year when Canada imposed similar tariffs on Chinese electric vehicles, steel, and aluminium products. Such like-for-like tariffs have been par for the course for China as it responds to geopolitical tensions with and tariffs from its key trading partners. From farmers to processors along Canada's pork and seafood value chain (collectively referred to as producers), misfortune certainly doesn't come alone as these tariffs will come into effect less than two weeks before the U.S. is likely to reinstate its 25% tariffs on all imports from Canada.

In 2024, almost 10% of pork exports and 17.5% of seafood exports from Canada were destined for China, as illustrated in Exhibit 1. While Canadian pork and seafood producers are certainly not as dependant on China as they are on the U.S. market—which accounted for almost 30% and more than 65% of Canada's pork and seafood exports, respectively—China is nevertheless an important market for these producers. Thus, the potential contraction in the Chinese demand for pork and seafood products in response to these tariffs could pressure volumes, EBITDA, and operating cash flows of Canadian producers, particularly smaller producers that have a narrow product offering and material exposure to China.

On the other hand, larger, more geographically diversified producers should be more successful in navigating the effect of China's current protectionist actions. That said, some producers, regardless of their size, may find it challenging to find readily alternative markets for certain pork and/or seafood products. For example, China was Canada's largest export market for edible fresh, frozen, or chilled swine offal and livers, accounting for almost 60% of the total exports of these products in 2024.

China's tariffs come at a particularly uncertain time for Canada's pork and seafood industries, given the possibility that the U.S. could forge ahead with 25% tariffs on imports of pork and seafood from Canada on April 2, 2025. If the U.S. tariffs are indeed imposed, the impact on some companies in these sectors could be devastating.

These trade disputes highlight the importance for all producers of pork and seafood producers—and indeed all producers of consumer staples—to diversify their supply and customer bases. That said, while a combination of these implemented and potential tariffs could create considerable near-term volatility and earnings pressures, we believe any material adverse effect on the long-term credit risk profiles of most large and well-diversified pork and seafood producers in Canada will be limited at this time, particularly if the extent and duration of these tariffs are contained.