China Initiates Anti-Dumping Investigation on Canadian Canola Imports in Response to EV Tariffs

The announcement of the investigation is heightening tensions between Canada and China and raising concerns about Canada’s agriculture industry.

China has launched an anti-dumping investigation into Canadian canola imports and announced a similar probe into certain Canadian chemical products in response to Canada’s announcement of new trade measures and amplified tariffs on Chinese EVs, steel, and aluminum imports.

China also plans to resolve the Canadian tariffs on Chinese imports issue through the World Trade Organization (WTO), a move that could escalate the current trade conflict between the two countries.

The new tariffs on Chinese EVs are set at 100%—in addition to the current 6.1% tariff—and are scheduled to go into effect on October 1. Moreover, tariffs on aluminum and steel will increase to 25% starting October 15.

The Chinese commerce minister criticized Canada’s tariffs, labelling them “discriminatory unilateral restrictive measures.” 

Canada’s tariffs on Chinese EVs align with similar trade measures imposed by the United States, which has taken steps to protect its car manufacturing industry from the flood of Chinese-made electric vehicles sold at lower prices. 

Both North American countries see these tariffs as essential to improving their local industries and protecting jobs from what they view as unfair competition.

China accuses Canada of harming its domestic industry

Chinese rapeseed meal prices dropped by 22% this year, and China’s commerce ministry claims Canadian canola is worsening the situation.

The ministry accused Canada of selling canola at unfairly low prices, which it says harms its domestic rapeseed industry. This led to the country’s decision to launch an anti-dumping investigation.

However, following the investigation announcement, China’s rapeseed meal futures increased by 6%, while Canadian canola prices fell by 7%.

The impact on the Canadian canola market

Canada’s agricultural sector, particularly its canola industry, could face significant consequences from this anti-dumping investigation. China is the largest market for Canadian canola, with the Canola Council of Canada (CCC) reporting that economic activity between the two nations reached $5 billion in 2023.

More than half of Canada’s canola exports went to China in 2023, making the industry highly dependent on the Chinese market. Moreover, between January and June this year, three-quarters of Canada’s exported canola seeds were sent to China.

Chris Davison, president and CEO of the CCC, expressed confidence in the strength of the trade relationship, saying, “China is an important and valued market for Canadian canola.”

“We will continue to engage on this issue to support market access and competitiveness for Canadian canola in this key market,” he continued.

Canadian farmers brace for uncertainty

Canadian Farm and Agri-Food Minister Lawrence MacAulay expressed deep concern over China’s investigation while local farmers, already struggling with rising costs and supply chain disruptions, brace for further economic impact.

John McKee, an Alberta farmer, described the situation as “just another frustration” that could potentially cut $100,000 from his revenue.

However, MacAulay reassured farmers that the government would closely monitor the situation and work to protect the agricultural sector. “We will defend and support the farm sector,” he said in a statement.

Previous import ban on Canadian canola

This is not the first time Canadian canola has been targeted. In 2019, China banned canola seed imports from two major Canadian companies, citing its concern over pests.

The ban, linked to diplomatic tensions over the detention of Huawei executive Meng Wanzhou, lasted until 2022 and cost the Canadian industry billions of dollars. The current anti-dumping probe has renewed fears of more economic losses.

China could seek alternative canola suppliers

Analysts suggest that China could turn to other suppliers, such as Australia and Ukraine, to meet its canola demand if relations with Canada deteriorate further.

However, limited trade with Ukraine and restrictions on Australian canola due to concerns about blackleg disease may complicate China’s ability to quickly replace Canadian canola imports.

“We expect China to buy larger volumes from Australia if restrictions on Australian canola are eased,” said Ole Houe, director of advisory services at IKON Commodities in Sydney.

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