Tariff war puts French fry market on edge

Trade between the United States and Canada has faced several challenges in recent years, partly due to the introduction of tariffs and trade restrictions. While the focus of these measures has often been on sectors such as steel, aluminum and dairy, potato products and French fries have also been the subject of trade disputes between the two countries.

Not for the first time

In 2018, the US government, also under Trump, imposed tariffs on Canadian steel and aluminum, which led to retaliatory measures from Canada. In response, Canada imposed tariffs on various US goods, including frozen French fries. These tariffs had a direct impact on prices and trade flows within the North American market.

In addition to the retaliation, the US accused Canada of dumping French fries on the US market. In 2020, US producers complained that frozen French fries from Canada were being offered at artificially low prices. This led to an anti-dumping investigation by US authorities, although it did not immediately result in additional import duties. In November of last year, another investigation was opened into possible unfair trade practices by McCain and Cavendish Farms in Canada.

Unrest

The signing of the United States-Mexico-Canada Agreement (USMCA) in 2020 brought stability to trade relations, but certain trade barriers remain. Competition between Canadian and American potato producers remains fierce, partly due to differences in production costs and regulations.

With Trump’s second term in the White House, the debate on import tariffs has also flared up again. Yesterday (Wednesday 2 April), the American president announced hefty import duties for many countries around the world, including the entire EU. With an overall levy of 20%, the Union comes off relatively well, but it is news that no one is waiting for.

The measure is remarkable when you consider the country’s dependence on the US. According to figures from Rabobank, the country imports around €300 million worth of fresh produce, including fries, annually. That is only 1% of total exports. It mainly concerns processed products that go to America. The US has developed into a real growth market for frozen fries from Europe in the past five years. Belgium and the Netherlands in particular have been able to profit from this. It is not yet clear how the levies will work out exactly on fries.

Dependence

Canada is the main supplier of American fries. Despite its gigantic domestic production, the US is certainly not self-sufficient. 86% of all imported fries come from this country. 13% is supplied by the EU. In that light, it is extra special that Trump is introducing such drastic measures, which will severely affect prices for consumers in his country. Producers and exporters of fries fear that the measures will have far-reaching consequences for world trade. After all, the volumes that would otherwise be shipped to the US now have to find a place elsewhere in the world. At a time when the market is already overcrowded due to increasing production in countries such as China and India.

Impact on grower

An impending trade war between the US and Europe and Canada may seem a bit far away. However, this impact can be felt directly by potato growers. When potato processors are faced with lower demand, this also has consequences for potato prices. In the situation where Canada is also affected by tariffs, part of their products will also become available on the world market. French fry prices have been under considerable pressure since the end of last year. The announced tariffs contribute to this.

Niels van der Boom

Niels van der Boom is a senior market specialist for arable crops at DCA Market Intelligence. He mainly makes analyses and market updates about the potato market. In columns he shares his sharp view on the arable sector and technology.n.vanderboom@boerenbusiness.nl