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Canada’s Potash Exports and the Trade Tensions with the U.S.

Canada is actively preparing to respond to the comprehensive tariffs enacted by U.S. President Donald Trump, which took effect on Tuesday. Potash, a critical component of fertilizer, could emerge as a significant tool in this escalating trade conflict, although economists are advising caution regarding such measures.

Approximately 85% of the potash consumed by American farmers is sourced from Canada, particularly from Saskatchewan, where potash plays a vital role in the local economy. In light of Trump’s tariffs, various U.S. farming associations, along with some Republicans, have suggested that potash should be exempt from these tariffs due to the potential adverse impact on agriculture.

Ontario Premier Doug Ford expressed to the media that Saskatchewan should contemplate ceasing potash, uranium, and oil exports to the U.S., recommending the exploration of alternative markets instead. “We need to ensure America understands the implications of its actions,” Ford stated. He pointed out that without Canadian potash, the U.S. agricultural sector might struggle significantly.

During a press conference revealing Canada’s initial round of retaliatory tariffs on U.S. goods, Prime Minister Justin Trudeau indicated that Ottawa would also assess non-tariff responses but did not directly address whether restrictions on potash or crude oil exports could be anticipated.

Scott Moe, the Premier of Saskatchewan, has previously resisted the notion of limiting Canadian exports to the U.S., insisting that the countermeasures should not disproportionately impact any single province. He stated that his cabinet would convene to explore all possible avenues in response to the U.S. tariffs while advocating for reduced interprovincial trade barriers and enhanced infrastructure, including pipelines.

“American farmers rely heavily on Canadian fuel and fertilizer,” Moe said. He further argued that Trump’s tariffs would increase costs associated with oil, potash, and uranium, inevitably leading to higher grocery prices for American families.

Despite a downturn in potash prices throughout 2023, Saskatchewan managed to export more than $11.5 billion worth of potash, with the majority shipped overseas, equating to about one-third of global production. The next largest contributors, Russia and Belarus, combined account for another third, maintaining a significant distance from China’s output.

Industry representatives from the Canadian fertilizer sector have warned that U.S. tariffs threaten food production and security on both sides of the border. They argue that such tariffs could push American farmers to seek supplies from other countries, which might not adhere to the same environmental and human rights standards.

The Global Supply Challenge

Corey Rosenbusch, president and CEO of the Fertilizer Institute based in Denver, Colorado, asserted that other nations would struggle to fill the void left by Canadian potash if U.S. farmers opt for alternatives. “There simply isn’t enough global supply to completely replace Canadian potash,” he noted during an interview.

Nutrien, one of Saskatchewan’s principal potash producers, has highlighted that the financial burden from tariffs will ultimately trickle down to U.S. farmers. The company has been actively engaging with policymakers in both the U.S. and Canada, advocating against the tariffs. Other potash mining companies in Saskatchewan, often foreign-owned, did not respond to requests for comment.

Rosenbusch remarked that importers had managed to secure sufficient fertilizer supplies during February, while tariffs were temporarily suspended, enabling preparations for the spring planting season. However, he mentioned that uncertainties surrounding tariffs had already led to price spikes, with some importers turning to Russian sources to meet high demand.

As farmers typically apply about 60% of annual potash in the fall, they are likely to experience the consequences of tariffs in the approaching months. Groups like the American Farm Bureau Federation emphasize that farmers have faced losses on major crops for three consecutive years amid rising global inflation and ongoing supply chain disruptions, further exacerbated by the new tariffs.

In February, after Trump’s initial announcement of tariffs on Canada and Mexico, Republican Senator Chuck Grassley of Iowa, an influential voice among agricultural states, advocated for a potash exemption, a sentiment echoed by various farming and fertilizer associations. A spokesperson for Grassley later indicated that he preferred to take a “wait-and-see” approach regarding the tariff policy.

Looking Ahead: Should Potash Exports Be Limited?

Experts caution that cutting off potash exports to the U.S. could escalate tensions and jeopardize food availability in both nations. Werner Antweiler, a professor at the University of British Columbia specializing in international trade policy, expressed concerns that such a drastic measure could alienate public sentiment in the U.S., potentially complicating Canada’s situation.

Antweiler advised against creating circumstances that could foster American animosity towards Canada, emphasizing the importance of maintaining goodwill to advocate for Canada’s position. He suggested that even limiting oil and gas exports, a proposition resisted by provincial leaders, would be a milder response compared to imposing a potash export ban.

In 2023, Canada imported $32 billion worth of agricultural products from the U.S., a significant portion of which now faces Canadian counter-tariffs. Carol McAusland, another expert from the University of British Columbia, proposed that a more strategic approach could involve instituting an export tax on potash bound for the U.S., thereby increasing prices for American farmers while also generating revenue for Canada.

She noted that implementing an outright export ban would be akin to utilizing a nuclear option, with potential long-term implications for consumer pricing due to delayed adjustments in the food supply chain. McAusland highlighted the importance of stakeholder communication in elucidating the reasons behind any price increases.

Kristen Hopewell, a global policy research chair at UBC, articulated that growing domestic dissatisfaction among American farmers could prompt pressure on Trump to reconsider or at least exempt agricultural goods from tariffs. She affirmed that the repercussions of Trump’s trade policies would likely inflict significant harm on American farmers, an essential base of support for the president.

“American farmers will find themselves squeezed from all sides, and their rising frustration will exert considerable pressure on the administration to reassess the current tariff landscape,” she concluded.

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globalnews.ca