Trade tensions between Canada and China are easing, which is good news for Canadian agricultural exporters. China is cutting tariffs on Canadian seafood, peas, and canola meal, while Canada will lower tariffs on Chinese electric car imports.
This change is expected to help regions like the Prairies, parts of Atlantic Canada, and British Columbia, which have struggled after previous export losses. The tariff on canola seed will fall significantly from 75.8% to 15%. While this is an improvement, some challenges still remain.
Boost Of Confidence In Trade
These tariff changes provide a boost of confidence for the 2026 planting season. Canola prices should stay steady at levels similar to last year. However, there are still questions about how long this truce will last and what it will mean for Canada’s auto industry.
The recent easing of trade tensions with China is a positive sign, especially for our agriculture sector. We’re paying close attention to canola futures on the ICE exchange, as the tariff drop from nearly 76% to 15% is a significant development ahead of the 2026 planting season. Before the trade dispute started in 2019, canola exports to China were worth over $2 billion a year. Restoring part of that trade could help stabilize prices.
This news leads us to consider investing in companies that are key to the Prairie export economy, particularly railways like CN Rail and CPKC Rail. Data from 2019-2022 shows a direct link between declining agricultural shipments and reduced rail volumes. A reversal in this trend should boost their earnings. We expect increased transport demand for canola meal, peas, and seafood from British Columbia and Atlantic Canada.
Impact On Canadian Dollar And Auto Sector
This development should also support the Canadian dollar. An improved trade balance from high-value agricultural exports typically strengthens the loonie against the US dollar. We are looking for chances to position ourselves for a drop in the USD/CAD pair, which has been around the 1.35 level for the past month.
On the flip side, lowering tariffs on Chinese electric vehicles presents a long-term risk we need to keep an eye on. Chinese EV brands captured nearly 10% of the European market in 2025, up from 6% the year before, by competing heavily on price. This trend may eventually pressure Canadian auto parts manufacturers, so we are monitoring put option activity in that sector as a safeguard.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
