Potential U.S. Tariffs in 2025 feat. Travis Toews

Devon Davidson: 0:00

The Farmland Exchange the official podcast of CLHBidcom.

Travis Toews: 0:06

Expert insights on buying and selling farmland in Western Canada.

Devon Davidson: 0:13

Welcome back to the Farmland Exchange. I'm Devon Davidson, your host and digital media strategist for CLHBidcom. We've got an exciting episode for you here today. We're going to be talking about US tariffs and their impact on the Canadian economy, as well as on the agricultural industry. Joining us today to get into that topic, we've got a special guest with us, Travis Toews, former finance minister for Alberta and also former president of the Canadian Cattle Commission. Travis, thank you for being here.

Devon Davidson: 0:39

Yeah, it's great to be here, Devon, and also joining us on the show this morning. Chief operating Officer for CLHBidcom, Bridget Henniger, and CEO of CLHBidcom, Roy Carter.

Travis Toews: 0:49

Thank you both for being here.

Devon Davidson: 0:53

All right, travis navigating tariffs, so recently announced this morning. We're looking at 25% tariffs on essentially everything, with the exception of energy. Is 10% correct, correct, okay? And how significant are these tariffs going to be for Canadian consumers in general? And then, you know, getting a little bit more specific how does that affect the agriculture industry?

Travis Toews: 1:13

Sure. Well, you know, in terms of Canadian consumers, I think that's yet to be seen certainly to a degree, of course, with the US putting on duties onto Canadian products, that it's not going to immediately affect Canadian consumers. In course, with the US putting on duties onto Canadian products, that's not going to immediately affect Canadian consumers. In fact, it could actually reduce costs for some Canadian consumers, as there will be surplus product in Canada in some cases. But of course, we know that the government of Canada is putting on reciprocal duties, effective today about $30 billion of duties today, and so certainly on some products there will be higher costs. Some products we just import from the US, or import a lot of product from the US, and so there'll be increased costs.

Travis Toews: 1:56

In the event, this, mr Trump's tariffs last for 30 days. There is another round of duties anticipated by the Canadian government, and that will be much broader, and most certainly that would affect Canadian consumers. One thing I should add, though, is the Canadian government and provincial governments, who've all been active. They're looking at products where we either produce that same product here in Canada. In other words, their target products for reciprocal duties are aimed initially at products that we produce in Canada or that we can purchase from other suppliers in other nations. So they're taking more of a surgical approach to minimize the impact on Canadian consumers. I think that's positive.

Devon Davidson: 2:46

Interesting, yeah, so they're taking more of a surgical approach to minimize the impact on Canadian consumers. I think that's positive. Interesting, yeah, roy. We talked a little bit about that going eye for eye with tariffs, and so this seems like a better approach, obviously being a little bit more specific about how you approach that, but is that the way to go about it? Should we be going tariff for tariff? I mean, does anybody win in that scenario?

Travis Toews: 3:01

Well, ultimately, duties, tariffs are going to cost consumers in the US. They're going to cost consumers in Canada. It's going to impact the economies of both countries and I think there's a legitimate debate in terms of how Canada should respond. I believe that Canada needs to respond. I believe we need to stand up for ourselves, retaliate. You know the Americans are our friends. They're, you know, our closest ally, trading partner. We share a border, we share businesses, we share families and it grieves me to end up in such a, you know, conflictual arrangement right now. But ultimately, I believe that US consumers, us businesses, need to feel pain when this trade relationship breaks down and I believe that will result in a quicker remedy.

Devon Davidson: 3:54

Okay, that actually brings up a previous point of discussion we had before we got on the air here, and that was this is all kind of under the guise, a little bit of border security and fentanyl, and so is that factual or is that just sort of maybe an out for Trump at a later date?

Roy Carter: 4:11

Yeah, if I can. Thanks Travis Talking about fentanyl. You know, in an eye for an eye. You know if you go in the back alley and the crystal meth guy spits on you, I'm not sure you spit back. You know if you're dealing with somebody with a mental disability, I would park. And I think Trump's whole deal about fentanyl. That's a ruse. I think the deal there is so he can back up the bus. I think he's testing the market on tariffs and if it doesn't work he'll tweet in two months oh thanks for solving the fentanyl issue, I'm getting rid of tariffs right.

Roy Carter: 4:50

I think it would be better off parking instead of increasing taxes for our own taxpayers. And it's interesting, where's it going to hit? Saskatchewan, manitoba, alberta are the biggest importers percentage-wise in Canada Saskatchewan's 80%, manitoba's 76% and Alberta's after that. So we're going to pay a disproportionate amount of the tax and it goes directly to Ottawa. Are we going to see it back? I don't think so, but Travis knows more about the flow of monies from provinces to the feds from that point of view.

Roy Carter: 5:28

But I think overall, I think Canadians have woke up and they're patriotic and the only reason you would have to put a tariff on in Canada is to force them to not buy when they had an option. And I think people are there. If you look at New Brunswick, they're not ordering any US booze, you know, captain Canada Ford in Ottawa or in Ontario. Rather, I think people are there and I think we can assume our people are smarter and actually, if they have a choice, won't buy. But why would you tax them if they don't have a choice? You know, if they've got to go buy a John Deere part, I'm not sure it's right to put a 25% tax on them, especially when the money's going to Ottawa and we're not going to see it again.

Bridget Hennigar: 6:15

Initially, though, I think they are looking at just specific targets, so maybe not necessarily the John Deere part. So they're talking about oranges and household items.

Roy Carter: 6:30

Yeah, totally, and I don't profess to know it all. One thing that does appear to be going on, though, is feed grains. So if you're a cattleman in Southern Alberta, you know the drought two, three years ago. A lot of their feed came from the US. So throw a drought in there and 25% tariff where they don't have an option for feed. You know, I'm not sure we're not playing into Trump's game a bit there myself, but that's just my own thought, and definitely I don't have the background that Travis does.

Bridget Hennigar: 7:02

Certainly it's going to cause inflation in the US and certainly there's going to be a spillover, because our economies are not the same. You know, they're so much larger than we are because our economies are not the same.

Travis Toews: 7:15

You know they're so much larger than we are. Yeah, it's true. And look, I can't imagine the devastating impact on the Canadian economy if we see 25% duties into next fall, right when we'd be experiencing, you know, the repercussions, say, if we had a drought in 2025. I think what we need to do is do everything we can to expedite resolution of this trade war, because we're all going to be losers and I'm of the mind that a surgical approach and applying duties where it's going to hurt the most in the US targeting congressional districts where they supported Donald Trump and targeting products that are produced in those areas I think, ultimately, americans need to be responsible for their electoral choices right now and and I think this thing resolves itself much quicker if it's Americans and American organizations charging the White House and saying your policies are creating extra cost for me and my business, I'm having to lay people off, I can't afford groceries at the end of this month I think this thing gets resolved a lot quicker. And I'll take us back to country of origin labeling.

Travis Toews: 8:33

You know, for those cattlemen that are watching this podcast, of course, you remember that really draconian legislation that was implemented in the United States that discriminated against Canadian and Mexican live cattle very purposefully and of course we took along with. We were co-compliance with Mexico and took the US government to the WTO in Geneva. I happen to be on the legal working group and we won the case in Geneva. We won the appeal S government to the WTO in Geneva. I happened to be on the legal working group and we won the case in Geneva. We won the appeal in Geneva.

Travis Toews: 8:59

We still couldn't get congressional attention on our ask until the Harper government published $2 billion worth of product, a list of products that we were going to put reciprocal duties on because of the US breach of the WTO agreement. And it was then, and only then, that American businesses rose up. In fact there was a group of almost 200 organizations rose up, became a coalition and marched on the White House and Congress and they said we don't know much about this kind of original labeling, but fix it. And Congress repealed the law. I think we need to make them feel it down there if we're going to see action.

Roy Carter: 9:43

Makes sense.

Devon Davidson: 9:44

Maybe you've already answered that question, but what measures can we take to reduce vulnerability to external trade policy in the future? Is there anything in terms of infrastructure within Canada that we can look at changing, and whether that's in agriculture or just in general?

Travis Toews: 9:57

Yeah, I mean, I mean it's. You know, certainly, generally we we need to grow up our economy. We've. I don't want to get political here, but since 2015,.

Travis Toews: 10:07

We've had no leadership in Ottawa, in my opinion, and we've seen our productivity languish. As a nation, we're now about 70% of US productivity. We've seen a stagnant business investment. Our GDP has looked reasonable, but when you peel back the covers, our GDP growth has been virtually entirely due to extra government spending and consumer spending, largely residential related all of that debt finance. So our GDP has been languishing and when you take a look at GDP per capita, it's actually dropping.

Travis Toews: 10:42

It is a bad news story in Canada, why? Because we've not paid attention to our competitiveness as an economy, we haven't played to our strengths, we haven't built pipelines, we haven't grown the resource sector, which is by far and away our greatest opportunity, and in fact, as we talk about lagging productivity in this country, the resource sector provides exponentially higher productivity than the average sector in Canada. So that's something we need to build pipelines every which direction right now, and we need to work, do everything we can to improve our competitiveness in agriculture as well. We need to ensure that we've got the most competitive tax structure, regulatory environment and competitive market. Global market access into every major importing country in the world other than the US, to create more resilience.

Devon Davidson: 11:33

You know, it seems like it's going to be a real challenge, though, in talking about the resource sector and building pipelines right, we've heard from the premier in Quebec and I just we talked about this earlier. Is there any chance pipelines get built when they are of the mindset that they are? How much of a challenge is that going to be.

Travis Toews: 11:48

Well, you know, I think we're seeing and, to Roy's point, public sentiment start to swing here in Canada. I think we're waking up as a nation and we're recognizing that, you know, the next generation is in trouble unless we grow up and take responsibility and move forward and play to our strengths. And so, you know, I think the polling would show that even the majority of Quebecers are supportive of the Canadian energy industry. What was it? Two to three weeks ago, quebec's environment minister came up publicly and said I'm supportive of Saguenay Quebec. Saguenay Quebec is an LNG play that ultimately the Quebec government shut down about three years ago. We've seen the NDP premier in BC, premier Eby, rise up and say we want to fast-track resource projects. I think there's a growing sentiment that as a country, we need to come together across partisan lines and ultimately ensure that we're building the infrastructure. We need to be competitive.

Devon Davidson: 12:49

Yeah, I know, scott Moe spoke about that a couple days ago, just basically said any pipeline that's applying for permits is going to get pre-approved. I loved it. Yeah, absolutely, roy Bridget. Any thoughts on it?

Roy Carter: 13:01

As far as capital in the packing plant industry, where do you see that going Travis here with on this artificial economy which tariffs create? You know Trudeau was almost ahead of Trump in that he got our dollar below 70 cents, so we almost had a 30% tariff. But you know, is the capital going to go in there, based with this uncertainty on tariffs, and say, well, I'm going to build packing plants knowing if that tariff disappears, live cattle might be heading south again.

Travis Toews: 13:33

Yeah, that's a great question, right? That's the question that we asked during bse. Of course we have the same issue. We, right right now we're exporting around 800 000 head of live cattle into the us. We're importing back about just over 300 000 and so we depend on on us processing capacity, as we did back, you know, in in 2003. So the question now is, of course, um is is this trade disruption going to be enough incentive to see more investment in packing plant capacity in canada?

Travis Toews: 14:07

And my hunch is that this trade war would have to play out for some length of time before you would see, you know, kind of border considerations on packing plant investment. I mean I would love if we'd build another plant here tomorrow in Canada. But I take a look at our experience in BSE. I mean we had plant capacity growth during BSE when we were locked out of the US border and that was, I think, at the time that was considered probably a longer window of uncertainty than I hope we're dealing with now, and that capacity came on kind of reluctantly. It was Cargill and the existing players that ultimately expanded capacity.

Travis Toews: 14:53

We did see one new entrant in Alberta. That was Rancher's Beef. They struggled to compete once the border opened because at that point they were competing with all the US plants and that's a tough market. So I think, unless all of a sudden this looks like a long runway, I'm not sure that you're going to start seeing an awful lot more investment in packing capacity. And in Canada right now and I say that regrettably, but the fact of the matter is in North America, especially with the latest capacity that's just come on, in the US, we're seeing more hooks than cattle, and so it would take a pretty bold packer to invest right now anywhere in the US. We're seeing more hooks than cattle, and so it would take a pretty bold packer to invest right now anywhere in North America.

Roy Carter: 15:39

Excuse me, Mexico, it would seem, might be in a better position than Canada. It seems like they have better packing capacity and they can move boxed beef as opposed to a third of our crop being or a third of our animals being live. Is that fair to say?

Travis Toews: 15:55

You know the US industry. They also do depend on US processing capacity. They export an awful lot of feeder cattle into the southern US, and so this will be very disruptive on their trade. I mean, those cattle will come into the US, but ultimately at a lower price, and that's what's going to happen with Canadian cattle going into the US as well.

Travis Toews: 16:16

You know one thing in my opinion, we've benefited from a really integrated cattle and beef industry in North America.

Travis Toews: 16:23

You know we've been more competitive globally because of it. You know, the cattle are born, raised, grassed, fed and processed in the most competitive jurisdiction and area at every stage of production, and that's meant, you know, it's ultimately resulted in a very competitive sector. And so, again, I grieve the impact that these duties are, you know, are ultimately going to lay on the industry and our competitiveness, and that's why I think Canada needs to respond as severely and as surgically as possible so that they feel it down there and so that we can resolve this. The other thing I would suggest is that Canada should ultimately propose moving up the free trade negotiations, the Kuzma negotiations, to immediate. I think what we need to do is let's get everything on the table, because we as a nation, are somewhat hypocritical on trade. We've got 300% duties on poultry and dairy imports. That's ridiculous. It's hypocritical. There's things we need to clean up. Let's get it on the table and let's talk about true free trade.

Devon Davidson: 17:31

Yeah, I was just curious about your thoughts on on the sentiment around Team Canada buy Canadian. There's a lot of uncertainty too with our government right now Pro-world government. Do you see a lot of that changing? In the fall we're going to see a new election right Fingers crossed. There's just so much uncertainty and I'm just curious your thoughts on that.

Travis Toews: 17:51

Yeah, you know what? I think Canadians are already buying Canadian and I have to say, you know well, you know we all experienced BSE. You know, when Canada discovered a BSE count, we lost all of our basically international markets. Canada was the first country in history where beef consumption actually increased after discovering a case of BSE. Yeah, canadians were so patriotic and supportive and they just went out and they bought beef. And I think we're we're starting to see the same thing here is is Canadians are finding Canadian product and they're choosing it. In fact, you know, we hear anecdotes of, you know, canadians canceling trips. I mean that's pretty serious. Yeah, yeah, and so I love that response. Now, again, I'm personally grieving the fact that we're in this situation with the Americans. We've had such an incredible relationship and I think we all long for that to be restored, but sometimes you need some tough love and I'm of the mindset we need it now.

Devon Davidson: 18:57

Well, you read my mind, because that was my next question was around some parallels between BSD and what's going on today. So it sounds like you would agree there's definitely parallels there.

Travis Toews: 19:04

Yeah, there certainly are, and again, I think, in the way consumers responded way back in 2003, we're seeing the same response from Canadians today, and I think, specifically in the cattle industry. Are these tariffs going to affect the price of live cattle? Unfortunately they are, because, as we've discussed, we depend on the US industry to process a big chunk of what we produce, and so there will be impacts almost immediately, I believe.

Devon Davidson: 19:33

Sorry, Bridget go ahead.

Bridget Hennigar: 19:33

Certainly, it's a lot of uncertainty and it changes the dynamics of economic competition in such a huge manner, and yet we hope that it's short-term. So it's hard for people to see what they should do going forward and what the future holds. I do think you're right, jim. There is a false economy with these tariffs.

Roy Carter: 19:58

Yeah, I think the US consumes something like out of their beef consumption is 3% Canadian. You'd know better than I do. Right, that's right, but it's a drop in the bucket. It's quite similar to the Mexican number. So they can do without either. To a large degree there's substitution and some price allocation there, but it's not big. But on our export side, I think what Travis talked about there, what we saw during BSE, is our problem is those live animals that they can't be put on a ship. This is not canola, you know. Canola is going to be quite different in my mind. You know it doesn't go to the States, but we can ship it to China, we can ship it to Korea or whatever it's going to be. I would think less of an effect than these backed up live animals that basically are caught with our shortage in the packing industry, right, I don't know if you'd agree with that, travis or not Absolutely right.

Travis Toews: 20:56

I think that's our vulnerability, that is truly our vulnerability. And the fact is, even though Canadian packers will have global market access for their product now, they'll probably sell it at a bit of a discount relative to what they could have received maybe historically in the US market, but they'll still sell it for probably significant value. On the live cattle side, the only way they determine who sells cattle into the plant is through price, and so I think one can predict that prices are going to drop ultimately to the price where US packers will actually come and buy cattle and Canadian cattle and pay the duty. So that's going to mean, you know, 15, 20% lower, perhaps crowding 25% on some days, and that will have a huge impact. Now again to Bridget's point.

Travis Toews: 21:50

We hope that ultimately this thing can be resolved sooner than later, because there's not really a quick remedy. I think the bright, the silver lining, maybe the bright spot from a timeline standpoint is right now. We've got very, very tight supply numbers on beef in North America relative to demand, and that's why we're seeing record cattle prices and beef prices, and so that's really positive. We do have a little extra plant capacity in Canada right now that they can speed up the chain, perhaps work Saturdays and get through more Canadian cattle, and so that's going to be positive.

Devon Davidson: 22:28

Maybe an unfair question, but you just mentioned timelines. Is there any way to gauge or to guess how long this will go on?

Travis Toews: 22:36

I have no crystal ball and I cannot figure out the logic of President Trump, so my belief is that the harder this trade disruption is on Americans, us consumers and US businesses, the quicker it will resolve, if they're able to ultimately move forward with very little effect. It would concern me that this could become, you know, the new normal in some way, shape or form. But the more disruptive it is on Americans, I think the quicker it resolves. That makes sense.

Devon Davidson: 23:20

Yeah for sure. What would your final words be to anyone listening to this in terms of tariffs and just how to approach it? We talked about this earlier as a team. There's maybe a sense of alarmism out there in general, and does everybody need to take a breath and just sort of approach this practically and just control the things you can control, or what would your message be to them?

Travis Toews: 23:40

Yeah, you know my message would be this you know today's a very concerning day. As Bridget noted, there's a ton of uncertainty out there right now. Certainty out there right now. But look, we, as Canadian Alberta ranchers Canadian ranchers and farmers have faced tough times before and we're resilient. We'll get through this. I'm confident Again. The big picture pieces are incredible. We've got great resilient beef demand out there. That's been tested time and time again. We've got a shrinking cow herd in Canada and North America in general and you know the industry is strong. This is disruptive, this is going to cost, but we will get through this and we're a resilient industry. We're a resilient people.

Devon Davidson: 24:29

Bridget Roy. Any other thoughts? Parting words no. Thanks, thanks very much.

Roy Carter: 24:31

Parting words no thanks, Thanks very much.

Bridget Hennigar: 24:34

Travis. Thank you, Travis.

Roy Carter: 24:35

Honoured to have you here and your knowledge. It's great to be here.

Devon Davidson: 24:39

Yeah, thank you, travis. We really appreciate that. All right well, thank you everybody for tuning in. We appreciate the support. If you have any questions, if you want to get in touch with us, visit the webpage on our website, clhbidcom slash farmlandexchange. Send us an email info at clhbidcom or give us a phone call 866-263-7480. We're happy to talk farmland with you, particularly if you're interested in selling farmland. We love to have those conversations. As I said earlier, we'd love if you could leave us a five-star review. It does help us get found amongst the algorithms and the platforms and people who are interested in this type of content will find it easier. So if you could do that, it would be great. With that, thank you for tuning in. I hope this was a positive exchange for you. Take care.