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Higher tariffs on products such as beef, pork, fruits and vegetables, and grains are eroding competition in the U.S. market, squeezing margins for producers already struggling with inflation, labor shortages, and supply chain disruptions. The agribusiness sector, which has thrived on North America's integrated supply chains, must now readjust. Alternative markets in Europe and Asia offer some opportunities, but they come with logistical challenges and regulatory hurdles that make them far less attractive than the United States. The idea that Canada can simply leave the U.S. market is a fantasy; economic and geographical realities dictate otherwise. Meanwhile, Mexico, faced with similar tariffs, could turn to other partners such as China, widening the gap between North American economies. The most troubling aspect of this shift is the apparent lack of preparedness among Canadian policymakers. There is no indication that Ottawa fully understands the magnitude of the transformation that is taking place. Instead of working to counter tariffs through proactive trade diplomacy, we see Canadian leaders clinging to a multilateralism that Trump's policies seek to dismantle. Retaliatory tariffs, while politically necessary, are a clear tool that will not distract Washington from its larger goal: strengthening trade to serve U.S. interests first and foremost.
The Future of CUSMA
With tariffs becoming the norm rather than the exception, CUSMA itself may become obsolete. Trump has long viewed NAFTA (and later USMCA) as a bad deal for the United States. His administration will likely seek to replace it with individual agreements, in which the United States can use its economic power to extract concessions from Canada and Mexico individually. The days of structured dispute resolution and trade predictability may be numbered.
Addressing Interprovincial Trade Barriers
Canada cannot afford to ignore the deep inefficiencies at its borders. Interprovincial trade barriers remain a self-inflicted wound that weakens the country's economic resilience. As Ottawa tries to respond to U.S. tariffs, businesses still struggle to move goods freely between provinces due to archaic regulations. If Canada hopes to offset the damage caused by foreign trade shocks, it must first remove these internal barriers. A unified and efficient internal market is the best basis for strengthening international trading partnerships. The agri-food sector must prepare for a future where trade uncertainty will be the rule. Canadian producers must invest in strategies to diversify and expand into non-traditional markets, even if this is expensive. National policymakers, for their part, need to shift their mindset from damage limitation to proactive trade positioning. It won't be enough to counter U.S. tariffs. Canada should build stronger alliances beyond North America and push for new trade agreements that reduce dependence on the United States.
Trump's tariffs are not just a policy shift; they represent a fundamental restructuring of the dynamics of global trade. If Canada doesn't adapt, our agri-food industry will suffer.
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