Trade talks between Canada and the US have broken down, and the US has reimposed a 50% tariff on some Canadian goods, putting pressure on prices, including canola.

Canada and the United States came close to reaching a new trade deal last week, but at the last minute, talks unexpectedly ended without an agreement, with Prime Minister Mark Carney ordering the Canadian delegation to return from Washington.

Immediately after that, the US imposed a 50% tariff on goods from Canada, including plywood, alcoholic beverages, electrical equipment, and hockey equipment, totaling about $20 billion.

The Canadian Prime Minister promised to respond to such a US move with tariffs "dollar for dollar."

The resumption of the trade war between the US and Canada will once again put pressure on the prices of all goods exported from Canada to the US and from the US to Canada.

Nearly 72% of Canadian exports go to the United States, while the United States sends only 15% of its exports to Canada. About 60% of crude oil and 85% of imported electricity to the United States come from Canada, which is also the largest supplier of steel, aluminum, uranium, and 34 critical minerals that the Pentagon purchases for national security.

At the same time, the US is trying to force Canada to abandon the digital tax on American monopolies - tech giants such as Amazon, Netflix and others, and to open the dairy market.

Prime Minister Carney explained on August 22 why Ottawa had decided to pull out of the talks. He said the US side had proposed provisions in the final hours of the talks that could limit the Canadian government's ability to make trade deals with other countries, a fundamental limit for Canada, which has signed about 20 new economic and security partnerships over the past year to reduce its economy's critical dependence on the US market.

Carney called the attempt to limit this freedom a “power play” that turns a trade issue into a sovereignty issue (recall that President Trump calls Canada the 51st state of the United States).

Traders fear that the intensifying confrontation could impact canola oil, which is shipped from Canada to the US for biodiesel production, so prices fell on Friday.

November canola futures on the Winnipeg Exchange fell 2.6% to CAD 799/t or $579/t on Friday (-2.6% for the week, -2.6% for the month), and on Monday continued to fall to CAD 787/t.

The resumption of the "trade war" between the US and Canada will increase pressure on canola prices, as Canada will be forced to increase canola exports rather than domestic processing, the production of which is mainly focused on supplies to the US.