🌎 Potential Impacts of Canada-U.S. Trade Policy Changes

The economic integration between Canada and the U.S. is the largest in the world, and trade policy changes which are now being proposed could have enormous repercussions for both countries. North American food and beverage companies rely heavily on trading relationships between the U.S. and Canada. Below are how these trading relationships and partnerships interact and may change if pending U.S. trade policy is implemented:

1️⃣ Interconnected Supply Chains: A significant portion of Canada-U.S. trade involves intermediate goods, meaning raw ingredients and products cross the border multiple times during production. This benefits food and beverage manufacturers, providing access to essential inputs at competitive prices.

2️⃣ Impact of Tariffs: If the proposed 10% U.S. import tariff is implemented, real income in Canada would decrease by 0.9% and 0.6% in the U.S., while lowering productivity in both countries. This would increase costs for ingredients, packaging, and equipment used by food and beverage manufacturers.

3️⃣ Trade Flow Disruptions: Canadian processed food and ingredients exports to the U.S. could decline, while U.S. imports into Canada will significantly be reduced due to becoming more expensive for Canadian consumers. A full-blown trade war could further increase costs and reduce market access.

4️⃣ Regional Impact: Given that Canada is the top export destination for 34 U.S. states, including major agricultural states like Michigan and Illinois, any disruption would ripple through supply chains, affecting everything from raw ingredients to finished products.

5️⃣ Cross-Border Investment: Canada invests significantly more in the U.S. than vice versa, with Canadian direct investment in the U.S. nearing $1.1 trillion. This investment often supports food production and distribution facilities in both countries.

For North American food and beverage brands, the key takeaway of the proposed U.S. trade policy is that maintaining smooth cross-border trade is essential for cost efficiency, market access, and supply chain resilience. Tariffs or other protectionist measures would increase production costs and consumer prices, ultimately affecting competitiveness. These ramifications over U.S. trade policy would replicate in Mexico, China, and other export markets.