When an opportunity recently arose to visit my husband’s Canadian cousins in Calgary, I jumped at it. While I wanted to meet his relatives, visit Canada for the first time and see the majesty of the Canadian Rockies, I was most excited to visit the grocery store. In 2024, Canada was both the second-largest exporter of agricultural products to the U.S., representing 19% of all American agricultural imports, and the second-largest destination of U.S. agricultural exports at 17% of the total. Combined, this total two-way trade added up to $70.5 billion and only trailed Mexico in total U.S. agricultural trade.
This robust trade relationship has been under strain in recent months, with a trade war starting in earnest on March 4 when a 25% tariff was briefly applied to all Canadian products imported by the United States (which were subsequently paused on all USMCA-compliant products). As of July 7, the U.S. has applied the following tariffs on Canadian products:
- 25% on all non-USMCA compliant products
- 50% on all steel and aluminum imports (imposed worldwide, including Canada)
- 25% on vehicle imports (imposed worldwide, including Canada)
Canada has responded with a series of retaliatory tariffs, including on nearly $6 billion worth of U.S. agricultural products. While the Canadian government announced exemptions to its own retaliatory tariffs for some inputs to Canadian manufacturing, retaliatory tariffs have largely persisted. All provinces in Canada have some level of market control, and all provincial governments responded to the trade war by stopping the import, and in some cases the sale, of American wine, liquor and beer.
During my visit last month, I surveyed three prominent grocery chains in Calgary and Kananaskis: Calgary Co-op, Safeway and a Walmart Supercenter. At every Calgary Co-op and Safeway location I visited, each individual retail item produced in Canada was marked with a Canadian flag. Safeway, which despite sharing the branding of U.S. Safeway stores has a separate, Canadian-based ownership group for Canada operations, featured prominent “Go Local” and “Go Canadian” signage throughout its stores.
None of the stores had anti-American signage, but there was lots of pro-Canadian messaging and clearly identified Canadian-produced goods. Additionally, Walmart, the only U.S.-owned retailer I visited, did not specifically identify Canadian-produced products, but they did have Canadian flags flying prominently throughout the store.
Many U.S.-based brands such as Oreos, Ben & Jerry’s and Frito Lay produce most of their Canadian-sold products domestically in Canada, so they bore the Canadian flag marker. Nudemarkt, a premium peanut butter, was advertised proudly by Safeway as “From Western Canada”, but also featured a label with a Certified Premium Quality American Peanuts claim.
US-Canada bilateral agricultural trade declines
So how is ag trade really being affected? In March, April and May, U.S. agricultural exports by value to Canada have declined by 8% as compared to the same period in 2024, a loss of $600 million. Exports declined most severely in April, before recovering somewhat in May. Meanwhile, U.S. imports of Canadian agricultural products declined by 9%.
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At the same time, our agricultural trade with the rest of the world has increased, with exports increasing 1% and imports increasing 7%. When combined, the U.S. agricultural trade deficit for the months of March, April and May increased year-over-year 43% for countries other than Canada and fell 12% in bilateral ag trade with Canada.
Changes in export values vary greatly by industry. Of course, some fluctuations in export values are driven purely by the market and may seem surprising. For instance, despite being hit with retaliatory tariffs, egg and egg products exports have increased 74% by value. This is solely based on sky-high prices from egg supply shortages, as volumes exported declined 35% over the same period.
Products hit with retaliation suffer greater losses
As one would expect, the over 400 U.S. agricultural products subject to Canadian retaliatory tariffs have borne the brunt of the trade losses. By value, U.S. exports of products targeted with retaliatory tariffs have declined 21% year-over-year during the tariff period. Agricultural products not subjected to retaliatory tariffs fell 6% by value.
Of all agricultural products, wine and distilled spirits have been the hardest hit with exports, declining by 89% and 82% respectively over the same period last year according to USDA data. This represents a $102 million loss for the wine industry and $49 million for distilled spirits.
Canada is the top export market for American wines at 35% of all exports over the past five years. The near total ban of wine imports and sales, a result of providence-controlled liquor distribution, comes at a perilous time for the wine industry, which has seen multiyear declines.
What’s Next?
Despite the declines, the U.S. and Canada still maintained an average of $5.5 billion in monthly bilateral agricultural trade in the months of March, April and May 2025. While there have been declines, and impacts are disproportionate across industries, there does seem to be light at the end of the trade war tunnel.
In a government survey of Canadian businesses conducted after the tariffs went into effect, the majority (66.6%) of Canadian importers of U.S. products did not seek alternative suppliers. Additionally, 71.5% of Canadian importers of U.S. products remained very or somewhat optimistic over their 12-month outlook.
Some Canadian retaliatory measures are also receding. In June, Alberta and Saskatchewan announced they would resume the import of American alcohol. However, American alcohol will still face a 25% retaliatory tariff and potential consumer backlash.
Time will tell if the declines in trade with our Northern neighbor are indicative of a permanent change or will return if frosty relations melt away.
Betty Resnick is an agricultural economist based in Monterey, California.
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