Skip to main content
RBC Thought Leadership Article Page 9

Five key takeaways from the Columbia Global Energy Summit 2025

Content Type: Article

WP Menu

wp-menu

Energy. Geopolitics. Trade.

All three topics were on full display at Columbia’s Global Energy Summit 2025. Tariffs and trade policy dominated the Summit, with significant implications to both the supply and demand of North American energy. Shaz Merwat, Energy Policy Lead of RBC’s Climate Action Institute, was in attendance and shares the five most pressing themes at this year’s event.

1. Energy risks becoming more complex

The push to re-orient trade flows to manifest specific economic outcomes (reduce a trade deficit, reshore production) likely increases price risk through a bifurcation of supply and demand in key commodities. At the most obvious, tariffs levied on steel, aluminum and possibly copper–all key inputs to energy infrastructure–result in regional pricing. As seen in the chart below, U.S. aluminum prices have largely decoupled from European pricing as a result of Trump’s tariffs. Similarly, price differences between U.S. Midwest hot rolled coil steel prices (US$1,075/tonne) and Northern Europe hot rolled coil steel (US$715) has increased to about $360/tonne, compared to $150/tonne at the start of the year.

Geopolitically, risks are also expanding beyond the simple ‘Middle East’ supply risk that we have known for the last half century. Spheres of influence can re-orient supply and demand relationships, especially in the case of LNG and critical minerals. These emerging geopolitical trade barriers ultimately weaken an otherwise more ‘global’ market to absorb supply and demand shocks–which likely are more deliberate at a time when weaponized trade is becoming increasingly more common (Russian gas, Chinese supply chains, the American market).

2. What is this energy dominance you speak of?

While the Administration has vowed to unleash U.S. energy dominance, to date, it appears to have done the exact opposite. On oil, Trump’s trade/tariff agenda has driven oil prices lower than those witnessed for most almost all of Biden’s presidency. WTI has twice dipped below US$60 per barrel in the past week–a level widely seen as U.S. shale’s breakeven–leading to increasing concerns of idled rigs and declining production; S&P Global estimates US$50/bbl oil could cause a U.S. production decline of 1 million bbl/d. All the while, OPEC is boosting production.

The continued desire to gut funding for the Inflation Reduction Act also stymies U.S. renewable energy, even for tax credits deemed friendly to the oil industry (such as the 45Q carbon capture tax credits). Lastly, concerns around supply inflation (steel/aluminum tariffs) and general market/economic uncertainly has created a very challenging environment to deploy capital.

3. Climate trade frictions remain alive and well

With the gutting of the WTO and Trump’s reciprocal tariffs, developing nations are increasingly seeing their preferential trade terms (higher ‘allowable’ tariff rates) erode. You can add climate to that list, as nations impose climate-related trade measures to enhance economic competitiveness.

In Europe, carbon border adjustments protect domestic carbon policy. In the U.S., a border pollution fee leverages America’s carbon advantage–especially in relation to China. The U.K. and Australia are also exploring carbon border adjustments of their own.

Domestic carbon policies without a climate trade measure (such as a CBAM), politically, is almost certainly bound to fail. Yet, expectations for developing nations to enact similar carbon prices as the E.U.’s emissions trading scheme–a system that has seen carbon pricing increase/expand over the last two decades–in a mere few years, seems unjust. This likely only accentuates climate trade tensions between North and South.

4. Reducing the trade deficit

In the eyes of U.S. President Donald Trump, reciprocal tariff rates yield a balanced trade relationship. For trade partners, a balanced trade relationship is as good as a ‘due north’ one can expect under Trump’s vision of America First. Trade partners will be served well if they can better house American (merchandise) exports.

In this world, U.S. LNG likely shines bright. The country is expected to surpass Qatar as the largest provider of U.S. LNG, globally, by 2030 according to RBC Capital Markets forecasts as seen below. For major LNG buyers that run large trade surpluses with the U.S. (the E.U., Japan, Korea, India), greater purchases of LNG supply can be the ‘easy’ win.

5. AI clusters and cross-border data flows

Nations with abundant, cheap electricity are best positioned in the race to build data centers. This likely results in supply ‘clusters’, especially torqued to renewable generation given the climate commitments of tech firms. Consensus is increasingly pointing to Canada, the U.S. and the Middle East as becoming cluster of American artificial intelligence deployment.

But what does that mean for data flows? Data protectionism towards data hosting (colocation) likely remains, but more alignment is needed on cross-border data transfers resulting from compute capacity (hyperscale). We expect more on this in the renegotiation of USMCA in 2026.

Shaz Merwat is the Energy Policy Lead of RBC’s Climate Action Institute

WP Menu

wp-menu

Issue #11

➔ Energy transition clashes with tariffs
➔ IRA: Scrap, slice, or save?
➔ Let’’s talk climate realism

Hot takes

➔ Canadians remain keen on climate. Compared to their American and British counterparts, more Canadians believe reducing industry emissions is an important climate goal, according to an Ipsos survey for RBC (see chart below). However, Canadians are less likely to think that reducing the use of natural resources should be a societal goal.

➔ Let’s talk climate realism. The Council on Foreign Relations launched the Climate Realism Initiative this week, aimed at developing a new U.S. climate strategy. Myha Truong-Regan , Head of Climate Research, says five ideas from the launch event caught her attention: (1) economic and national security priorities will drive countries’ climate agenda; (2) climate can be a source of competitiveness in global trade; (3) global and national climate goals should be easy to understand, to garner widespread public support; (4) the world will need to pursue both fossil fuels and renewable energy as energy demand rises exponentially; (5) framing climate action as personal sacrificial acts rather than smart spending decisions will not resonate with the public. 

➔ Major investors are hoovering up renewable assets. Companies are circling over renewable assets that have seen their valuations shrink over the past five years. Brookfield Asset Management recently bought U.K.-based National Grid’s onshore U.S. renewables business for US$1.7 billion, and its units swooped in to buy French developer Neoen SA for US$6.6 billion, and UK offshore wind farms for $2.3 billion. KKR & Co. is looking to raise US$7 billion for its first Global Climate Fund, while Copenhagen Infrastructure Partners , closed its largest-ever renewables fund, at €12 billion, in March. Deep-pocketed investors are on the prowl. 

➔ A new U.S. biofuel policy may limit Canada’s market opportunities. Many Canadian farmers and biofuel producers worry they’ll be excluded from the proposed U.S. Clean Fuel Production Credit (Z45). This new credit replaces existing incentives that Canadian producers once benefited from and introduces a farmer tax credit with carbon-intensity and country-of-origin restrictions, says Lisa Ashton, Agriculture Policy Lead. U.S. farmers could be at a significant advantage if majority of Canadian farmers are ineligible for Z45 tax credits. 

The climate trade wars are here

Add the humble terbium to the list of commodities caught up in the tariff turmoil. The silvery, rare-earth mineral, used in wind turbines, was one of seven minerals on Beijing’s export controls as part of retaliatory measure to the U.S.’s reciprocal tariffs this month. China, which controls 95% of the global terbium’s supply, also restricted exports of substitutes gadolinium and scandium that could impact big American tech firms.

While autos and steel are grabbing the headlines, companies involved in sectors leading the energy transition are also hit by tariffs, and scrambling for materials that make the parts, cogs and pistons that drive clean technologies.

It’s early days, but here’s what we are watching as tariffs—especially if they remain in place beyond a few months—disrupt the energy transition:

  • EV batteries will be hit hard. U.S. baseline tariffs and higher levies on China and the EU will likely roil global supply chains. BloombergNEF expects batteries and solar prices to be hit hardest.

  • Certain metals and minerals were exempted—but China had other plans. The U.S.’s exemption list includes copper and zinc, rare earths, germanium, nuclear fuel, lithium and cobalt, etc. But China is weaponizing its metal dominance to hit back. Chinese control of several key minerals would hurt Western nations at least in the short to medium term. Canada, with its abundant resources, can help allies.

  • Uranium is about to get expensive. The U.S.’s dependence on mined uranium, especially from Canada, and foreign enrichment services, such as from Russia, make the price trajectory of nuclear fuel uncertain, notes Vivan Sorab, Senior Manager, Clean Tech. Tariffs on Canadian uranium were initially set at 25%, before falling to 10%. Rather than signing new purchase contracts in early 2025, U.S. reactor operators are staying on the sidelines on tariff uncertainty, according to Mining.com . With the U.S. reliant on foreign manufacturers for certain reactor components (e.g., reactor pressure vessels), tariffs could further hike costs.

  • Renewables are no strangers to tariffs. Tariffs on renewable energy systems and components averaged twice those applied to fossil fuels, the International Energy Agency said last year—long before the U.S.’s trade war started.

  • Cleantech was getting really cheap. Many technologies had seen costs drop over the past decade. However, a 100% tariff on solar PV modules today would cancel out the decline in technology costs seen over the past five years, according to the IEA.
    “A range of Chinese clean energy imports already faced high duties; these will become steeper yet,” BloombergNEF noted.

  • Climate remains an emergency, btw. While equity indices vacillate day to day, the global carbon emissions index is only headed one way: higher. CO2 levels are at the highest level in 800,000 years, the UN estimates. Every roadblock, material shortage and trade barrier is delaying efforts to rein in emissions.

IRA: Scrap, slice or save?

The Inflation Reduction Act is among the legislations in the U.S. currently under scrutiny, as Washington eyes spending cuts.

The U.S. Congress has to decide how to pay for the extension of the Tax Cuts and Jobs Act, which could impact IRA tax credits. Here’s how RBC Capital Markets is thinking about IRA’s prospects:

➔ With a potential price tag of US$4.5 trillion to extended tax breaks over 10 years, Republican lawmakers have indicated that every piece of the tax code is on the table, including energy-related IRA tax credits. 

➔ In a signal of some support, 21 Republican House members wrote a letter recently, arguing that developing clean energy was critical for the U.S. to meet President Donald Trump’s goal of becoming “energy dominant.” 

➔ Additionally, 83% of the US$126 billion in private sector manufacturing investments made since IRA’s passage was in Republican congressional districts. 

➔ While RBC Capital Markets does not foresee a full repeal of the IRA as a likely outcome, “we caution against broadly optimistic views that Republican lawmakers will hold the line to save green tax credits in the face of pressure from Republican leadership and ultimately, Trump himself.” 

Trump Tracker

A veritable selection of orders and actions from Washington that are impacting climate and energy transition:

➔ Reciprocal tariffs: The big one on April 2. It sent markets plunging, nerves fraying and brows knitting tighter. Originally, baseline tariffs started at 10% but many countries faced higher tariffs. Close trading partners Canada and Mexico were spared—for now. As markets plunged, Trump retained the universal 10% on most countries, except China which now faces 125% tariffs. 

➔ Upshot: “Major blow to the world economy,” is how European Commission President Ursula von der Leyen described it. China has retaliated with 84% tariffs now in total. 

➔ Tariffs on imported vehicles: The blanket 25% tariffs on all foreign-made vehicles. Parts that are compliant with the U.S.-Mexico-Canada Agreement would remain tariff-free—for now. 

➔ Upshot: Canada responded with matching tariffs on U.S. vehicles that are not compliant with the North American free trade deal. Stellantis shut down its Windsor assembly plant for two weeks. 

➔ Boosting American critical mineral production: The order aims to streamline ways to increase production of uranium, copper and potash. Also on the list: gold and coal that are often not viewed as critical. 

➔ Upshot: The U.S. is not abundant in several critical minerals vital for key technologies such as semiconductors. However, loans, and investment support for new projects through the International Development Finance Corporation (DFC), could “make it a clever candidate” to boost mining in the U.S., according to the Atlantic Council. A potential U.S. minerals deal with Congo highlights the administration’s wide push to source minerals. 

Curated by Yadullah Hussain, Managing Editor, RBC Climate Action Institute.

Climate Crunch would not be possible without John Stackhouse, Myha Truong-Regan, Sarah Pendrith, Farhad Panahov, Lisa Ashton, Shaz Merwat, Vivan Sorab, Caprice Biasoni and Frances Dawson.

Have a comment, commendation, or umm, criticism? Write to me here (yadullahhussain@rbc.com)

Climate Crunch Newsletter

WP Menu

wp-menu

Starting April 5th, the U.S. is imposing 10% baseline tariffs, with most countries facing a tariff rate that appears to be based on a calculation of trade deficits as a share of exports from that country. Crucially, it exempts Canada and Mexico as it’s not applied to USMCA-compliant products.

Here are six impacts we’re watching out for:

1. Canada lives to fight another day, but not without some pain.

Existing tariffs remain, including those based on IEEPA/fentanyl , steel and aluminum and auto and auto-parts that went into effect just past midnight today. Duty-free trade still applies to products that are USMCA compliant—perhaps a signal that the President still takes the agreement he signed seriously.

  • Most, if not all, Canadian auto manufacturers have 50% S. content, which means an effective tariff rate of 12.5%. Combined with a 70-cent Canadian dollar, it puts Canadian auto and parts makers in relatively good stead, especially in comparison to Asian and European automakers facing up to 25% in tariffs.

  • The story on energy is similarly that of relief—RBC Capital Markets highlighted how most, if not all, oilsands producers are USMCA compliant, and not be subject to the 10% tariff on energy. A 10% tariff on other resource products and potash, although significant, is not enough to affect producers’ bottom lines.

  • While we may see specific provinces and sectors negotiating for exemptions, most will likely not want to rock the boat until the federal election is over on April 28, and an economic and security partnership can be negotiated. But Canada isn’t out of the woods yet—lumber is still in the U.S. administration’s crosshairs, and President Donald Trump alluded to a longstanding irritant of his in Canadian dairy.

2. It’ll be hard to raise revenues (only) from tariffs.

To fund tax cuts, President Trump and Secretary Howard Lutnick’s stated goals are to raise US$1 trillion in revenues from tariffs and achieve another US$1 trillion with an aggressive program of cost-cutting through the Department of Government Efficiency. But the math doesn’t add up.

The government would have to generate 12.4% of total revenues from tariffs to raise US$1 trillion—something the U.S. government has not achieved in the past century, even during the height of the Smoot-Hawley tariffs in the 1930s. Even the more modest goal of US$500 billion seems hard to achieve given the U.S. federal government hasn’t raised 6.2% of its revenues from tariffs since 1929—when the Great Depression started.

3. Will China deviate from its targeted retaliatory approach?

China now faces an effective tariff rate of 54%, on top of tariffs on steel and aluminum and those levied under the IEEPA. The Chinese government has historically responded with targeted retaliatory tariffs, particularly on agriculture and geared toward swing states or those voting Republican. However, these are the highest effective tariff rates ever levied on China. It will be interesting to see if Beijing sticks to a strategy of targeted action, or one that will be more sweeping. Regardless, a trade war between the world’s two biggest economies will cause significant economic ripples and rejig supply chains.

  • Of note, China recently entered exploratory talks on a regional free trade and investment agreement with Japan and South Korea, two countries that are not traditional Chinese allies. This is an important signal that countries in Asia and beyond are creating bulwarks and buffers against a United States that they increasingly see as threatening and unpredictable. These developments may isolate Canada even further.

4. The price of the climb down may be steep.

Trump explicitly signaled to countries that he was willing to negotiate concessions in exchange for reduced trade actions. The cost of these concessions will be worth watching, with the countries first in line to negotiate exemptions (especially the ones most exposed to U.S. trade actions) likely getting a raw deal. Expect the coming few days, before the tariffs officially come into force, to be a lobbying frenzy in D.C. as countries most exposed to U.S. trade action try and negotiate lower rates.

  • Allied Retaliation: Trump explicitly warned countries that teaming up against the United States to retaliate would yield higher tariffs. Canada may not wish to gang up against the United States as the degree of integration between our economies does not favour Canada. But expect the Canadian government to partner with allies on strategic sectors, such as critical minerals or semiconductors, to press against U.S. trade action and to share a more unified message on the costs of a full-blown tariff war on sectors with strategic or national security importance.

5. Congressional rancor over the trade deficit emergency.

On the other side of Pennsylvania Ave., the Senate voted to pass a joint resolution to strike down the emergency Trump used to levy tariffs on Canada, with four Republicans joining the Democrats. The joint resolution is unlikely to pass the House, where caucus discipline is more strongly enforced, but it is still a repudiation of Trump’s trade policies against the country’s closest ally. The President used the same authorities, stemming from the International Economic Emergency Powers Act, deeming trade deficits as a national emergency. Expect to see another fight in Congress as the legislature seeks to regain control over trade and tariff policy, and as Democrats use the joint resolution as a cudgel to split the Republicans and a referendum on Trump.

6. Global macroeconomic and supply chain shocks.

The bigger channel of impact of these tariffs—and the biggest unknown—will come from governments and businesses completely reshaping the trading links that have been built over the past century. Some companies may choose to reshore production to the United States, while many others may avoid the U.S. completely. Regardless of how the tariffs are implemented, the macroeconomic effects of uncertainty are significant and dire, as our Economics team has noted, pushing up the U.S. effective tariff rate over 20%.

Trump appears to want to achieve multiple goals through his policy instrument of choice, including reshoring investment and trade flows, strengthening the greenback, raising revenues and using tariffs as economic leverage to achieve other policy outcomes. It is unclear whether he will be able to achieve all these goals. What is clear is that this is only the beginning of a rocky ride for the global economy, and for Canada.

Varun Srivatsan is Director, Policy and Strategic Engagement, RBC Thought Leadership

WP Menu

wp-menu

Field Notes: How Canadian businesses are navigating trade tensions

China’s 100% tariff on canola oil and meal has Canadian farmers concerned. That stress level could climb, as China also has its eye on Canadian canola seeds—the largest segment of our canola exports to China—, which have been spared for now. “That would be the other big shoe to drop,” said Rick White, CEO of the Canadian Canola Growers Association (CCGA), which represents approximately 40,000 farmers across Canada.

Canola was developed by Canadian scientists in the 1960s—hence the name. It’s considered healthy oil as it’s low in saturates (an unhealthy fat) and high in monounsaturates (considered good). Canada is the world’s largest canola producer and counts, with 40,000 farmers generating $43.7 billion, with the U.S., China and Japan—in that order, its three biggest export markets. Australia is among Canada’s biggest canola rivals.

As the Chinese tariffs hit Canadian canola farmers, they are freezing investments and need support. White shared some ideas on ways to soften the blow:

  • White says the tariffs were not a surprise, as past disputes with China (2019-2020) had targeted canola.

  • China has once again targeted the agriculture sector in direct response to Ottawa implementing tariffs on Chinese EVs, aluminum and steel.

  • The industry feels the Canadian government “absolutely bears the responsibility” of that action and should compensate farmers for the financial losses that they will incur.

  • Other major canola seed exporting countries include Australia, Ukraine, Russia. Canada specifically grows canola, which is defined as having low erucid acid and low glucosinolates. Australia and the EU are also significant growers of canola or double low rapeseed, which is of comparable quality.

Canola seeds in the crosshairs

  • A looming Chinese anti-dumping investigation on Canadian canola seed could trigger more tariffs. That’s “the big shoe to drop.”

  • Canola seed is Canada’s primary canola export to China, with canola oil and meal accounting for a smaller portion. In 2024, China imported six million metric tonnes of Canadian canola seed, worth $4 billion.

  • The Chinese are following World Trade Organization (WTO) rules around anti-dumping. WTO challenges take time but provide legal recourse. The CCGA has registered as a party to China’s investigation.

Farmers are looking to freeze investments

  • Farmers rotate crops for agronomic reasons, but canola is a Canadian staple crop, which limits alternatives. Agronomics involves soil and crop management and helps optimize distribution, management and productivity of land.

  • Farmers are already expressing concerns about market risks from China and the U.S. with some suggesting delays in capital investments and equipment purchases due to uncertainty.

  • Plus, purchase of new equipment could possibly come from the U.S. that could be subject to countervailing duty by Canada.

  • “Farmers are not going to take that risk of investing big pieces of capital into renewing infrastructure … there’s going to be a big chill on investment, at least this year.”

Across the border, more trouble is brewing

  • The U.S. is Canada’s largest canola export destination, valued at $7.7 billion in 2023. The U.S. has not yet imposed a 25% tariff on canola, as CUSMA (the Canada-U.S.-Mexico Agreement) remains in effect. But once exemptions expire, new U.S. tariffs could further harm Canadian canola exports.

There are ways to build a tariff-less ecosystem

  • Last December, the CCGA sent a letter to the federal government, forecasting farm gate losses of between $1.76 billion to $4.33 billion for 2025-26 due to the Chinese tariffs.

  • Ottawa has announced new loan products to sustain the industry, but farmers argue they cannot borrow their way through this crisis and need cash compensation.

  • “The federal government needs to compensate farmers commensurate with the losses that they will incur because of China… farmers can’t, nor should they, be expected to borrow their way—they need to be compensated.”

  • The CCGA is advocating for the development of a domestic biofuels and sustainable aviation market.

  • It could be a new domestic market for at least 2-3 million tonnes of canola seed. It would help soften the blow for canola farmers, as the risk and uncertainty around U.S. and Chinese markets is going to remain for a long time. It is an opportunity to help diversify and reduce Canada’s heavy dependence on China and the U.S. markets.

Dig deeper:

WP Menu

wp-menu

RBC Chief Economist Frances Donald answers three questions on Trump’s tariffs and its impact on the global economy.

Q: What do the U.S. tariff exemptions mean for Canada’s economic growth outlook? U.S. still has tariffs on Canadian autos, steel and aluminum.
FD: How quickly the Canadian economic narrative has shifted. Prior to “Liberation Day,” our biggest concern was the implications of broad based tariffs on Canadian growth and particularly, that Canada appeared to be the biggest relative loser of American trade policy. Now, while various sector specific tariffs will weigh on Canada in 2025, our concerns are shifting to more “traditional” risks to Canada’s economy—the rising risk of a U.S. recession and a drop in oil prices. The latter may be more “indirect” in some capacity, but they are also more of a function of global developments that have far less to do with Canadian-U.S. political relations.

Q: Do you expect the Bank of Canada and the U.S. Federal Reserve to reassess as U.S. tariffs are rolled out?
FD: The Bank of Canada and the Federal Reserve are facing different challenges, just like their economies are struggling with different risks. In Canada, inflation is around 2% with some mild upside created by global supply chain disruptions ahead. And yet, Canadian growth is still tepid and supportive of a few more rate cuts. As of now, we continue to expect another 50bps of rate cuts.

The Federal Reserve is in a much greater bind. The size and scope of tariffs announced are consistent with higher inflation and a much lower growth profile. That “stagflationary” mix pulls at both sides of the Fed’s dual-mandate in opposite directions (price stability and full employment). At this point, our expectation is that concerns about inflation spiralling higher will keep the Federal Reserve on the sidelines, but markets have been increasing their probabilities of rate cuts to support what is likely to be a much weaker economy.

Q: A bigger tariff war looms, with the U.S.-China and U.S.-EU imposing tariffs and retaliatory tariffs. Will that be inflationary and damaging for the Canadian and global economy?
FD: Just how damaging U.S. tariffs turn out to be will largely be a function of how long they stay in place for, and economists are poorly credentialled on making that call. But the largest concern at this juncture is that we witness a global uptick in prices as supply chains become entangled and the interconnected nature of our global economy makes it difficult for any economy to escape rising costs. There are certainly similarities to the COVID era that can be drawn, except for one major one: we didn’t head into pandemic-era inflation having just gone through pandemic-era inflation. That is, Canadians and Americans have already experienced an over 20% increase in prices since 2020, and the ability of households and businesses to absorb a second wave of inflation so soon after is likely very limited. Last month, it seemed the trade war was North American centric. Now, it is global and without borders.

Further reading:

Yadullah Hussain is Managing Editor, RBC Thought Leadership

WP Menu

wp-menu

Field Notes: How Canadian businesses are navigating trade tensions

Canada’s agriculture sector is among the first casualties of the trade wars with China and the United States. Monty Reich, CEO of SWT Ltd, a farmer-owned, independent grain and crop input company in Saskatchewan, discusses how farmers are navigating the trade tensions.

Uncertainty and volatility a near-daily irritant

  • The current environment is challenging, uncertain—and confusing. “Each day is a different journey,” Reich said.

  • Even before the 100% Chinese tariffs on canola oil and meal and yellow peas were imposed, the U.S. had started talking tariffs in December, with durum wheat on the list to be hit.

  • SWT had to absorb the financial blow of U.S. tariffs on durum wheat, choosing not to pass those costs onto its farmer-shareholders. “We sold product into future spring positions and took that hit on our own bottom line,” Reich noted.

  • U.S. tariffs have made durum wheat exports more costly. “We are the importer of record,” Reich noted, meaning SWT itself is directly responsible for paying the 25% tariff—a cost that prohibits any future sales.

Canola prices are plunging

  • For canola farmers, the impact has been brutal. Prices have plunged by 25-30% since the Chinese tariffs were imposed, dropping from around $16 per bushel to $12.

  • “Margins on the farm are pretty narrow as it is,” Reich said. Even small price shifts can turn a profitable season into a financial disaster. With this level of decline, farmers are watching their incomes evaporate.

Tariffs are hitting from all quarters

  • China’s restrictions on canola and yellow peas have cut off a crucial market, leaving farmers with few places to turn to. “China accounts for about 87% of the yellow pea market along with the U.S. and India,” meaning farmers now face a near-total lockout.

  • India’s on-again, off-again tariffs on pulses add another layer of uncertainty, leaving Canadian farmers with few viable alternatives.

Farmers are scrambling for alternatives

  • “Growers are penciling in right now, trying to figure out what’s going to provide them the best return,” Reich said.

  • Farmers could pivot to other crops, but in practice, it’s not that simple. “It’s not easy to just flip commodities,” he explained.

  • Farmers are “scrambling” to adjust before the next planting season.

Deferred investments, shrinking profitability

  • Some canola crush plant investments were already deferred a couple of years ago due to ongoing challenges with the Chinese marketplace and the cost of construction.

  • Production facilities being built today are going to continue, and existing facilities will continue operating, but margins are getting tighter.

  • Farmers are weighing whether to cut back production, reduce costs, or even scale down their operations altogether.

Fear of stranded shipments

  • China’s anti-dumping tariffs on canola seeds can come soon, adding to the threat.

  • That risk makes exporting to China a high risk. If canola seed shipments hit the waters, the Chinese “can slap on a tariff tomorrow.” That uncertainty alone is enough to spook exporters and depress prices.

  • This feels different from the dispute with China in 2019 that was more restricted to a few companies over “dockage concerns,” and quality issues.

Backdoor trade routes

  • In the past, when China restricted direct imports, Canadian canola still made its way there—through other markets.

  • “There will be other South Pacific Asian countries that’ll take the product and flip it over to China.” But those countries will try to secure the goods at a discount.

  • In addition, building trade relationships with new markets takes time. It’s not simply about switching markets from one to another (e.g., from China to the Philippines).

Other crops are also facing challenges

  • Pulse crop (e.g., lentils) are also facing challenges, particularly due to tariffs from India. This adds pressure to the profitability of these crops, with farmers having to navigate changing trade policies, especially when tariffs are applied or removed unpredictably.

Who will replace Canadian canola?

  • In the short term, other countries such as Australia can substitute Canadian canola, but Canada’s product is generally seen as highly reliable and high-quality.

  • As supply and demand dynamics shift, other countries may adjust their crop rotations to meet market needs.

  • Billions of dollars have been invested in Western Canada in canola capacity and crush capacity. There’s a lot of investment at stake in canola to “just let it go away,” Reich said.

The need for stronger government engagement

  • While farmers often prefer minimal government intervention, strong trade agreements are essential in resolving issues like tariffs or trade restrictions.

  • Canada’s government should ensure robust trade relations with key partners (China, the U.S., India) to reduce barriers, Reich recommended.

  • Saskatchewan, for instance, has set up nine offices abroad to facilitate smoother trade relations and reduce friction.

  • Canadian agriculture needs to have strong representation globally, not just through trade agreements, but through actual presence and ongoing diplomatic engagement.

  • Government investments are needed to improve infrastructure to boost interprovincial markets and move products west-to-east.

WP Menu

wp-menu

U.S. President Donald Trump finally dropped the hammer on the auto sector with tariffs on automobile and parts imports, upending the global auto industry and threatening economic damage on major suppliers to the U.S. market. The headline 25% U.S. levy has dominated the news but, as we discuss, the true cost of tariffs will be in the details. With countries from Canada to Germany to Japan roiled by the announcements, the industry is grappling with the following questions:

1. How will the tariffs be applied?

  • The proclamation is light on detail on targeted automobiles and automobile parts. Engines and engine parts, transmission and powertrain parts, and electronic components were singled out in a 2019 investigation into the impacts of automotive imports on U.S. national security.

  • But industry remains uncertain about the extent of tariff applicability this time around. The proclamation also allows the U.S. Secretary of Commerce and domestic producers of automobiles or auto parts to request parts not already included to be tariffed in the future.

  • The U.S. imported US$83 billion in auto parts and accessories (not including engines) in 2024, with Mexico and Canada supplying 41% ($35 billion) and 13% (US$11 billion), respectively.

2. How will tariffs be implemented and compliance determined?

  • The true cost of tariffs will depend on the amount of U.S.-origin content in imported vehicles, but specifics remains unclear.

  • According to the president’s order, the 25% tariff will apply to the value of non-U.S. content in imported vehicles. However, discussions between the U.S. and Canada suggest CUSMA-compliant automobile imports with at least 50% U.S. content may be exempt. Those with less than 50% U.S. content may receive 12.5% tariffs.

  • Automotive parts will see tariffs of 25% applied to the value of non-U.S. content, according to a process being determined by U.S. Customs and Border Protection and the U.S. Secretary of Commerce. They are expected to come into force by May 3.

3. How will supply chains be affected?

  • The co-development of U.S., Canadian, and Mexican automotive industries have enabled efficiencies of production and market growth across the continent, from the Automotive Products Trade Agreement in 1965 (also known as the Canada-U.S. Auto Pact) through the integration of Mexico via NAFTA in 1994, and more recent renegotiations of Regional Content Values (RCV) under CUSMA.

  • Over the past three decades, Mexico has steadily gained on the U.S. in production share of passenger vehicles in North America, rising from 10% pre-NAFTA in 1991, to 30% of passenger car manufacturing within the continent by 2023. Over the same period, the U.S.’s share of passenger car manufacturing dropped from 75% to 58%. Mexico surpassed Canada’s production share within the continent in 2008.

  • Though Canada’s share of passenger vehicle manufacturing grew from 15% in 1991 to peak at about 22% by 2005, it had dropped to 12% by 2023.

  • A similar trend has emerged in motor vehicle parts. From supplying 9% of U.S. imports in 1990, Mexico has grown to 41% of automotive parts imports in 2024, while Canada’s contribution has reduced to 13% in 2024 from a 1990 peak of 36%.

  • Data on the geographic origins of components across 315 car models available to the U.S. public between 2021-2025, show that, combined, U.S. and Canadian auto parts make up as much as 77% of the total value of certain models, with Mexican origin parts reaching as much as 80% in others.

  • Such high levels of integration means tariff-driven disruptions to automotive supply chains have a high likelihood of rippling through the industry, raising costs and putting pressure on manufacturers, distributors, and consumers across all geographies.

4. What’s the way forward?

  • The precise nature of tariff applicability, compliance, and enforcement remains largely uncertain, leaving manufacturers with few clear options on the way forward.

  • What’s certain is that impacts will be felt on both sides of the border, with 35 U.S. districts across 26 states importing auto parts from Canada in 2024, and southern Ontario’s automotive sector among the hardest hit.

  • The severity of reciprocal tariffs would dictate the added burdens on auto and parts manufacturers. Canada’s response to the U.S. auto tariffs would also determine the future of RCV-based tariff exemption thresholds.

Vivan Sorab is Senior Manager, Clean Technology, RBC Climate Action Institute

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

WP Menu

wp-menu

It has been 70 days since U.S. President Donald Trump directed eight federal agencies to commence the review, design and implementation of his America First Trade Policy (link). In total, over 20 investigations have progressed concurrently, to be delivered to the President on April 1.

While the final “reciprocal” tariffs are most likely a catch-all trade response to these investigations, their recommendations will shape the course of the Administration’s trade path over the next four years. In essence, we are entering a new phase – one (hopefully) out of a sprint and into a more measured pace, across six key trade themes that extend beyond the use simple tariffs as identified in the graphic below.

To get a sense of what to expect over the next few months from a hawkish Washington, read John Stackhouse’s interview with Steve Verheul, Canada’s Chief Trade Negotiator in the renegotiation of NAFTA (now CUSMA), on how he sees the trade war playing out. For more, see here.

Trump’s America First Trade Policy

Trade Investigations Due April 1

Source: whitehouse.gov

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

WP Menu

wp-menu

I hosted a discussion for RBC clients with Steve Verheul, Canada’s Chief Trade Negotiator during the first Trump Administration, and now a member of the Prime Minister’s trade advisory council. Here’s some of what he shared: 

1. Canada-U.S. headed toward even greater trade conflict

  • We will be lumped in with the “Dirty 15” that have the biggest trade surpluses with the U.S. They include China, Canada, Mexico, the European Union, Vietnam, India, Japan, South Korea, Brazil, Thailand, Malaysia and Indonesia.

  • We may face 14-15% tariffs, although it could start smaller and grow until a trade balance is achieved.

  • Do not expect many exemptions, including on energy and food, at the start.

  • Canada will hit back with counter-tariffs, as mapped out earlier this winter.

  • Prime Minister Mark Carney won’t negotiate until the sovereignty threat is retracted.

  • Verheul does not recommend negotiating at all unless there is an agreement that duty-free status for Canada is still an option.

  • All the major countries and regions are trying to negotiate exemptions and carve-outs. The Eurasia Group believes Canada is still in the light tariff category, according to a grid of U.S. negotiating plans of small, medium, large (7%, 15%, 30%).

2. The U.S. approach will be unprecedented and unpredictable

  • U.S. President Donald Trump will receive reports next week on an array of topics, which will determine U.S. trade action on everything, from China to deficits to currency manipulation.

  • There are indications that the president will start low and grow.

  • The implementation schedule may not be clear, nor is there clarity on possible exemptions.

  • Reciprocal tariffs will be applied using a combination of tools including the International Emergency Economic Powers Act (IEEPA), a U.S. federal law, and Section 338 of the Tariff Act of 1930, or Section 301 of the Trade Act of 1974.

  • The U.S. Congress enacted IEEPA nearly 50 years ago to give the president the power to act promptly to protect the nation’s security—it had never been used.

  • April 2—the day Trump is expected to announce reciprocal tariffs—is the beginning, not the end, as negotiations will ensue.

  • The U.S. is thinking about excluding many countries and narrowing its list and focusing on a list of key sectors, as global tariffs would be too complex. The U.S. would have to go from 17,000 tariff lines to three million tariff lines, which would be impossible to administer.

3. The U.S. strategy is contradictory

  • It’s hard to negotiate as the U.S. is aiming for an outcome that tariffs may not be able to deliver.

  • The U.S. aim is to reshore manufacturing, but companies will require years to do that, and tariffs will cause near-term damage to the U.S. economy.

  • Supply chains are also too complex, and costly, to reshore.

  • It will inflict a lot of self-harm, which the administration appears willing to look past. The U.S. applied tariffs on steel and aluminum even though it requires imports to meet 50% of demand. As an example, the U.S. will need to build four Hoover dams to meet the energy requirements to produce steel domestically.

  • The administration is also trying to extract non-tariff concessions from a range of countries. Expect services to be thrown in, althought the U.S. has no apparent strategy or infrastructure within government to negotiate complex sectors.

  • The U.S. administration doesn’t fully understand the implications of what they are trying to do, caught between trying to move very quickly and the stark reality that companies cannot reshore quickly.

  • “It‘s hard to negotiate with a country willing to shoot itself in the foot.”

4. Trump’s approach is fundamentally different this time

  • His core advisors now are Peter Navarro, Steven Miller and Howard Lutnick, who lack institutional knowledge on trade and current agreements.

  • Robert Lighthizer, who led talks during Trump 1, had clear authority as well as expertise.

  • Jamieson Greer, the current U.S. Trade Representative (USTR), is not yet playing a big role, and focussed largely on China.

  • Lutnick has most influence on the Canada file, including oversight of USTR.

  • Trump is committed to five strategic sectors: steel, aluminum, lumber, semiconductors and pharmaceuticals.

5. VAT will remain a problem

  • The U.S. administration is coming down hard on the EU and Canada on what it views as unfair trade practice in value added tax (VAT) and general sale tax (GST).

  • The EU won’t budge, and it’s hard to see Canada making concessions as it’s a critical revenue source.

  • The issue will be contentious globally as 90% of countries have some form of GST like VAT.

6. USMCA is at risk

  • Verheul suggests leaving dairy, digital services tax (DST), and other contentious issues as is until there is proper negotiation.

  • He would not negotiate until tariffs are removed, and the U.S. expresses willingness to protect duty-free access. Without that commitment to duty-free, the U.S. Mexico-Canada (USMCA) trade agreement would not be worth fighting for.

  • He suggests sticking with the trilateral approach. Canada made “a significant mistake” by isolating Mexico early on.

  • Mexico is better to have at the table as it makes Canada look better, especially as the U.S. is more concerned with the southern border. Let Mexico take the heat.

7. Canada needs a strategic offramp

  • The U.S. is interested in broader continental security, but that’s hard to discuss if it’s not committed to trade access.

  • Canada’s premiers are also not aligned on what concessions to make.

8. Chinese investments will be a target

  • That would be tricky, especially for critical minerals.

  • Canada has taken a number of measures to restrict Chinese foreign direct investment in sensitive areas. That was largely done in reaction to U.S. concerns, but presents a challenge to Canada in how it develops its critical mineral resources.

  • Canada needs to rethink its relationship with China through the prism of critical minerals and border security.

9. China’s reaction to U.S. actions will be key

  • China has signalled it will retaliate with countermeasures, including tariffs, sanctions, and export controls to U.S. actions but only after U.S. measures take effect.

  • China will likely respond by targeting U.S. agriculture, as it’s the top importer of U.S. agriculture, at US$33.7 billion, followed by Mexico at US$28.2 billion, and Canada at US$27 billion.

10. Markets may prove to be the final check and balance

  • Trump still considers stock markets to be the leading arbiter. So far, they have been muted or resilient in response to tariff threats, at least in daily swings.

  • Business and consumer confidence is being hit, and causing an investment slowdown.

  • The S&P 500 is down 7.1% since Trump’s January 20 inauguration. The index is 9.3% lower than its all-time high, achieved on February 19, 2025.

John Stackhouse is Senior Vice-President, office of the CEO, at Royal Bank of Canada, and head of RBC Thought Leadership.

Read some of our latest insights here:

For more, go to rbc.com/thetradehub.

Download the Report

Follow RBC Thought Leadership on LinkedIn here.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

WP Menu

wp-menu

China retaliated with tariffs of its own on various Canadian agricultural exports in response to Ottawa’s tariffs last fall on Chinese electric vehicles and metals.

The new tariffs mark an escalation in trade tensions between Canada and China, with the risk tilted to the upside. It comes as the agriculture sector is already experiencing challenges posed by the trade uncertainty with the United States.

Another hit to Canadian exporters

China imposed 100% tariff on Canadian exports of canola oil, canola oil-cake, and pea imports, and 25% duties on pork and aquatic products, which is expected to hit some industries and provinces hard.

The tariffs are expected to affect approximately $2.9 billion of domestic exports (in 2024), with seafood products making up the largest share at nearly $1.2 billion, followed by canola oil and cake at $938 million, and pork products ($467 million). China is also Canada’s second-largest export market for listed pea products ($306 million).

While the tariffs are expected to target only a small share of total Canadian domestic merchandise exports—roughly 0.4% in 2024—they are likely to pose challenges for some Canadian agricultural exporters.

Although China remains an important Canadian market for these products, its share of total exports has declined in recent years. In 2019, China accounted for roughly $3.8 billion (25%) of the export value of these goods, which has since declined to $2.9 billion, or 14%, in 2024. Over the same period, Canadian exporters have shifted to the U.S., with exports for these goods rising from $7.2 billion (47%) in 2019 to $12.3 billion (60%) in 2024. But that pivot to the U.S. could prove to be costly if Washington rolls out tariffs on Canadian exports as part of its April 2 trade “liberation day,” or later this year.

Atlantic provinces in the eye of the storm

Among provinces, Nova Scotia is most exposed to these tariffs. The affected goods account for approximately 9.2% of the province’s total domestic exports. Notably, China is Nova Scotia’s second-largest export market for lobsters, which amounted to nearly $452 million in export value in 2024.

Newfoundland & Labrador shrimp exporters ($105 million) and Saskatchewan’s exporters of canola oil and cake ($515 million) are among the most exposed within their respective provinces. The listed tariffed goods account for approximately 1.7% and 1.5% of their total domestic exports, respectively.

China whips out an old playbook

China’s newly imposed duties on Canadian agricultural exports are not unprecedented. In 2019, China’s import restrictions on some Canadian canola exporters, led to a sharp decline in imports of Canadian canola seeds to the world’s second largest economy.

The restrictions are estimated to have contributed to significant losses for Canadian exporters, on reduced export volumes and the prices received for their products. The Canola Council of Canada estimated that between March 2019 and August 2020, China’s actions cost the domestic industry between $1.54 billion and $2.35 billion in lost sales and lower prices.

If the tariffs persist for some time, canola farmers fear job losses, declines in production volumes, and capital cuts beyond the projects that are already under way, according to an industry executive.

While the new tariffs could trigger losses for the targeted industries, the more significant risk stems from the potential escalation of the trade conflict. The latest measures, introduced on March 20th, followed China’s anti-discrimination investigation into Canada’s tariffs on Chinese EVs and metals. Meanwhile, China’s ongoing anti-dumping investigation into Canadian canola (including seeds) and chemical products raises the possibility of additional trade barriers. Given that China remains Canada’s largest export market for canola seeds – valued at approximately $4 billion in 2024 – any further restrictions could have significant economic repercussions on the industry.

Salim Zanzana is an economist with RBC Economics.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.