By Will Verboven Contributing Editor
In the years I have written for this distinguished publication, there has seldom been a time when some border or trade issue has not caused exasperation in the Canada/United States cattle and beef businesses. Those trade issues included countervailing duties, country-of-origin labelling, BSE import restrictions, border inspection regs, WTO disputes, etc. All of those were eventually resolved at a cost of millions to stakeholders. I challenge market analysts to show how any of those issues made any real difference to the profitability of the American cattle producer in the long run.
I have advocated for a more formal economic union between Canada and the United States, similar to the European Union. My dream is to eliminate all trade issues in the cattle and beef business; we could then concentrate on the real threat to the industry – declining beef consumption in North America. But alas, that remains a fantasy if the latest challenge to the beef trade business is considered. This time, the latest trade disruption threat is not even unique to the cattle and beef trade sectors, but our billion-dollar business is caught in the crossfire over President Trump’s arbitrary imposition of a 25 percent tariff against anything purchased from Canada.
By the time this column is published, the Trump tariff deadline of Jan. 20, 2025, will have passed, and the Canadian cattle and beef businesses will be in a state of marketing turmoil, depending on how the tariff is being applied, delayed or negotiated. The best outcome would be to carve agriculture out of the tariff and let the beef industry continue to provide food at the lowest cost to North American consumers. The second best would be to suspend the tariff on food-related products until the issue is resolved. That scenario is the one that some ag industry observers presume will happen, noting that a deal will be made after a few weeks of short-term pain and disruption.
Be that as it may, the big multinational processors with huge plants on both sides of the border were rumoured to have been stockpiling Canadian beef in U.S. cold storage facilities in anticipation of the deadline. It’s expected that stakeholders in the cattle feeding business would have moved a lot of Canadian feeder cattle across the border before the deadline. Those same stakeholders and big packers would have protected their position through commodity hedging to deal with the tariff disruption.
If the tariff issue becomes a protracted and retaliatory disaster, as I fear, the Canadian beef industry will be thankful that two giant multinational meat packers control up to 80 percent of our beef-processing capacity. That’s because they have the capacity to mitigate some of the negative impacts of the tariff on beef imports and exports. For instance, depending on the year, Canada is the largest foreign market for U.S. beef exports. Most of those exports come from plants in the Midwest. Being those same plants are owned by the same folks who own the Canadian plants, those U.S. exports would be quickly displaced by product from Alberta plants to dodge the tariff. Those same multinationals send Canadian and U.S. beef to offshore markets. It would seem logical for those operators to displace U.S. exports with more Canadian beef exports, which would be available at a discount due to the U.S. tariff.
All the millions that the U.S. Meat Export Federation has spent developing markets for U.S. beef will be in jeopardy the longer the tariff against Canadian beef is in place. I expect U.S. cattle producer and processor groups are quite aware of the overarching impact a U.S. tariff on Canadian beef will have on the logistics of a highly integrated market. The people laughing all the way to the bank are Australian and New Zealand beef exporters who will take advantage of any North American beef market disruptions.
The people laughing all the way to the bank are Australian and New Zealand beef exporters who will take advantage of any North American beef market disruptions.
Finally, I can’t help but comment on the Trump notion that Canada become a 51st state. The wise saying goes, “Be careful what you wish for.” Canada has social, cultural, demographic and debt issues that few Americans are aware of, but would become the responsibility of the U.S. taxpayer if Canada became a state larger than any state in the U.S. union. For instance, we have a province of 8 million people who essentially only speak French; that province is paid $12 billion a year to stay in the Canadian federation. Our national government is more than one trillion dollars in debt. We may not have much of a military, but due to our national health program, we have more than 3 million healthcare workers who are government-paid employees.
We have a far-left socialist provincial government on the West Coast, much worse than California. If the progressive political nature of Canada is added into a U.S. state scenario, President Trump would lose by 40 electoral votes. Take it from someone who is a lifelong admirer of your country – the United States is much better off if Canada remains your best friend and trading partner and not a U.S. state.
