Saskatchewan industries face tariff fallout as Canada protects supply management

Canada’s focus on protecting Canadian farmers through supply management has exposed other industries, according to one professor, leaving them to bear the brunt of tariffs.

University of Saskatchewan agricultural economist Stuart Smyth joined the Evan Bray Show on Aug. 24, just days after trade negotiations between Canada and the U.S. failed.

One major sticking point at the table was dairy supply management.

Read more:

• Canada will return to negotiating table when America has ‘the right attitude’: Carney
• Scott Moe says tariffs spark concerns about Saskatchewan industries
• Saskatchewan wild blueberries selling at an all-time high

Smyth said protecting supply management will result in a worse deal for Canada in the future.

The practice dates back to the 1970s, though Smyth said Canada is the only country still protecting supply management the way it does.

According to Smyth, under this system, only a certain amount of dairy products is allowed to enter Canada at a low tariff rate. Once that threshold is met, the tariff jumps from a few per cent to as high as 200 to 300 per cent.

This doesn’t just apply to American dairy products; it also extends to European ones.

“So of course, the tariff makes the product simply too expensive to import into Canada,” he said.

As a result, Canada gets only a small amount of imported dairy products, and anything over the threshold is sold at a high price.

This protects the country’s supply management system by keeping prices stable for farmers here rather than allowing cheaper goods to enter.

For those in the U.S. wanting more access to the Canadian market, though, keeping this industry “untouchable” removes any incentive to make a deal, according to Smyth.

“Why would any country want to negotiate a trade agreement with Canada if they can’t get access to all parts of the market?” he asked.

Effect on energy and lumber exports

From an energy perspective, Heather Exner-Perot, senior fellow and director of energy, natural resources and environment at the Macdonald-Laurier Institute, said she’s not worried about tariffs.

“Putting on an export tax or by limiting what we sell to the United States, I just can’t see any upside to that,” she said on the Evan Bray Show.

It’s one area where both countries want the same thing, according to Exner-Perot: Canada wants to sell more energy, and the U.S. wants to buy more.

Though energy is exempt from the latest tariffs, she said she actually hopes it’s a point of discussion among negotiators.

That’s because it will help each country determine how to get what it wants.

For Exner-Perot, this weekend was just another indicator that energy and resources are the way Canada needs to go.

Not everyone is as optimistic, though.

Forest Saskatchewan CEO Carl Neggers joined the Evan Bray Show to discuss the impacts on the province’s forestry industry.

While the new tariffs don’t directly affect softwood lumber, Neggers said they hit peripheral products that weren’t affected before, such as strand board.

The effects don’t stop there, either.

“When you charge tariffs in the U.S. economy, it softens purchasing activity in that economy, which reduces the market opportunities to sell product there,” he said.

In the past two years, according to Neggers, there’s been a 24 per cent year-over-year reduction in exports due to the pre-existing tariffs on softwood lumber.

With roughly 75 per cent of Saskatchewan’s product going to the U.S., Neggers said more work is needed to find other trading partners.

Reciprocal tariffs could pull on toy store’s strings

A southwest Saskatchewan toy store is trying not to get too wound up by the latest tariffs on toys, puzzles and models.

“I’m really disappointed is my first reaction,” said Bob Siemens, the owner of Cowtown Kids Toy & Candy. “The reason why is customers have grown very loyal to different brands.”

The store in Maple Creek has one of the largest selections of puzzles in Canada, with 50 per cent of its puzzles imported from U.S. companies.

Depending on how Canada chooses to retaliate, Siemens said the store could face reciprocal tariffs on puzzles and toys.

Siemens said it is challenging to find alternatives to the different toy brands sold at the store.

“There’s not a lot in our industry that is produced in Canada,” he said. “We don’t have a choice of, for example, buying Canadian carrots or carrots from California, where we have the same product, just a different country of origin.

“With a lot of our toys, there is no other option, so we either sell them or don’t.”

The toy store has felt the sting of tariffs before, when Siemens said candy was tariffed by the United States last year.

Siemens doesn’t expect extra support from the federal government for the toy sector.

Uncertainty in farm equipment industry

Degelman Industries makes farming equipment in Saskatchewan and does significant business in the U.S., according to Derek Molnar, director of marketing and communications. The company is headquartered in Saskatchewan but also has dealerships in the U.S.

Molnar said a substantial part of the company’s business comes from the U.S., and some years more than half its sales were in the U.S.

“It’s always tough when it feels like a part of what you’ve been doing has been taken out from underneath you,” Molnar said.

He said the company has been figuring things out as information rolls in, adding that it’s all a little vague at this point.

“We’re kind of in the process now of unpacking which of our parts, which of our materials fall under (the tariffed) codes,” he said.

Under the original tariffs, Molnar said only a couple of Degelman products are affected, but he said they don’t know if it will be the same thing this time around.

Over the past nearly two years, Molnar said the company has had to do a lot of work to decipher the changing trade situation, and it’s been tiring.

“So when we have hours being poured into documents and reading part numbers and figuring out this and that, it just takes away from what we really want to be doing, and that’s building good products for our farmers to help feed North America,” he said.

It’s not just tariffs put in place in the U.S. that have Molnar concerned; he said the company is also worried about the prospect of retaliatory tariffs in Canada.

“You hope that cooler heads prevail; you hope that you can get back to the neighbourly feelings that we once had, where we could do that cross-border purchasing and selling and not end up with this kind of nonsense,” Molnar said.

At the end of the day, he said the company just wants everything to get back to normal so customers can make choices based on product quality instead of tariffs.

Economics professor says impact of tariffs on Saskatchewan will be relatively minimal

While the latest round of U.S. tariffs left many Saskatchewan industries in the clear, Canada’s own actions could cause the most damage to the province.

University of Regina economics professor Jason Childs said the new 50 per cent tariffs will hit B.C., Ontario and Quebec hardest.

“It’s not going to affect Saskatchewan that much,” he said. “The U.S. tariffs won’t hit us very much.”

Instead, the retaliatory, or counter, tariffs scheduled to kick in on Sept. 8 could have the biggest impact on this province.

According to Childs, tariffs between the two countries might become a “tit-for-tat exchange.”

Canada is “going to retaliate in kind, and the cost of a number of products are going to rise in Saskatchewan as a result,” Childs said.

He expects the retaliation will target consumers and manufactured goods.

Childs said he hopes Canada is “smart enough not to do broad-based tariffs because that’ll be really damaging to the Canadian consumer.”

Childs also predicted Canada’s counter-tariffs will target swing states, the ones that might vote for Republicans in the midterms.

It’ll be a way to try to “punish industry in those states,” he said.

“If we take an action that hurts these specific states, then voters in those states might be less likely to vote Republican, and that might make the Americans more likely to concede to our demands,” Childs said.

Restarting negotiations

Even though the short-term impacts of these tariffs aren’t catastrophic for the Canadian economy, Childs said that can only last so long.

Having limited access to the American market can’t be a long-term strategy, according to Childs, who said he can’t think of a single country that’s had financial success without it.

So, the federal government needs to restart negotiations.

“Get back to the bloody bargaining table. This is not going to be resolved by chest pounding, by posts on Twitter, by CBC op-eds; it’s going to be resolved at the bargaining table,” he said.

Comparing Canada’s approach with the U.S. to how Mexico has handled this administration, Childs said the latter has remained calm and steady in its negotiations.

As a result, he said, Canada’s deal has taken a very different turn from Mexico’s.

“It’s time to stop playing politics with people’s jobs, people’s livelihoods,” Childs said about the Canadian negotiators, adding that constructive negotiations take two parties.

— With files from 980 CJME’s Lisa Schick & Gillian Massie and 650 CKOM’s Mia Holowaychuk