U.S. tariffs could become catalyst to bolster Canadian food supply chains: experts

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This article was published 17/01/2025 (619 days ago), so information in it may no longer be current.

Experts say U.S. tariffs on Canadian goods could accelerate a push to ramp up domestic food processing and manufacturing, even as some companies consider moving operations south.

But if real change is to happen, they say more government support is needed.

“Until … we actually focus our attention on a strong manufacturing strategy for food in this country, we’re just going to continue to try to incentivize people to do things, but not necessarily have a strong plan in place,” said Michael Graydon, CEO of Food, Health and Consumer Products of Canada.

Incoming U.S. president Donald Trump has threatened high tariffs on imports from countries including Canada, raising concerns about inflation within the U.S. but also the potentially devastating impact on Canadian agriculture and food companies as well as consumers.

Canada’s food processing and manufacturing capacity has declined significantly in recent decades as the country’s reliance on imported products rose, said Graydon. But after the supply chain struggles of the COVID-19 pandemic and other disruptions, “I think there is a resurrection of this desire to be more self-sufficient.”

Canada generally has a trade surplus with the U.S. when it comes to food, meaning it exports more than it imports, said Tyler McCann, managing director of the Canadian Agri-Food Policy Institute. But there are some products where Canada relies heavily on imports from the U.S., he said.

Experts said Canada is particularly vulnerable when it comes to those products, such as fruits and vegetables, and processed foods like jams, sauces and snacks. Those areas could be good targets for boosting domestic capacity, said McCann.

Today, there are several “pushes and pulls” sparking interest in reinvesting in domestic operations, said Evan Fraser, director of the Arrell Food Institute at the University of Guelph.

Technology is one of them, he said, as Canada now has more tools to grow fresh produce year-round. But on a broader level, he said supply chain disruptions and geopolitical tensions are sparking more interest in so-called “nearshoring,” or moving operations closer to home.

Roderick MacRae, a retired associate professor at York University’s Faculty of Environmental and Urban Change, agrees there’s a larger shift happening, one that makes it crucial to build back resilience into the domestic food system.

“I think international trade is breaking down,” he said.

Some recent investments on Canadian soil include a soy processing facility in Ontario expected to open next year; Hershey returning to the Ontario facility it vacated in 2007, U.S. company Blommer Chocolate expanding its Ontario site; and an investment by McCain Foods to double the size and output of a processing facility in Alberta.

The Canola Council of Canada previously told The Canadian Press that the industry has been expanding its domestic processing in recent years to mitigate potential trade or supply chain disruptions.

More domestic capacity would help keep prices on some items stable, said Fraser.

But it’s easier said than done to build up that capacity, said Graydon. The costly, multi-year projects need more government support in order for there to be a real shift, he said — and not just government money, but a “strong food manufacturing strategy.”

In other areas of the industry where there’s a significant trade surplus with the U.S., tariffs may make companies wary of investing further in Canadian operations, said McCann.

“It seems like the uncertainty will really put an investment chill on Canadian food processing,” he said, which could include companies holding off on expanding or upgrading existing plants.

McCann said it’s more likely that for now, major companies will delay investing in their current facilities rather than packing up shop and moving capacity south of the border.

“But if we get into a world with 25 per cent tariffs that look like they’re going to be in place for an extended period of time, the likelihood of that increases over time.”

McCann agreed the government should be doing more to prevent that from happening.

“I think we need to see more of a comprehensive approach from the government around how are they going to support those businesses that are at risk of moving to the United States,” he said.

Several business groups this week called on the government to help Canadian firms mitigate the harmful effects of potential tariffs and retaliation.

Dennis Darby, Canadian Manufacturers and Exporters president and CEO, said businesses are responding to the uncertainty by pausing plans to invest in operations or expand, and he’s concerned some could move production to the U.S.

“We’re already seeing … a bit of a chill on investment and expansion and a chill on hiring,” he said.

MacRae said Canadian companies may be concerned about Trump’s promises, but they won’t be hasty with their decisions.

“I’d be surprised if somebody’s prepared to make major shifts in their production capacity based on what Trump says,” he said.

“I mean, that would be foolish.”

This report by The Canadian Press was first published Jan. 17, 2025.