China announced on Tuesday that it will initiate an anti-dumping investigation into canola imports from Canada. The move comes shortly after Canada imposed significant tariffs on Chinese electric vehicles (EVs), leading to a sharp increase in domestic rapeseed oil futures in China. Last week, Canada followed the United States and the European Union by announcing a 100% tariff on imports of Chinese electric vehicles, along with a 25% tariff on steel and aluminum from China.
This has escalated trade tensions between the two countries, with China strongly condemning Canada’s actions. A spokesperson from China’s Ministry of Commerce expressed strong opposition, calling the measures discriminatory and unilateral. In response, China plans to investigate not only canola but also certain Canadian chemical products. The potential impact on Canadian agriculture is significant, as more than half of Canada’s canola production is exported to China. Canola, also known as rapeseed, is used in cooking oil and various other products, including renewable fuels.
Following the announcement, China’s rapeseed meal futures surged 6% on the Zhengzhou Commodity Exchange, reaching a one-month high of 2,375 yuan ($333.56) per metric ton. However, the ICE canola contract for November delivery in Canada dropped by its daily limit of $45, or 7%, to $569.7 per metric ton. The Chinese Ministry of Commerce cited a significant increase in Canadian canola exports to China, which rose by 170% year-on-year in 2023, reaching $3.47 billion.
The ministry claims that this surge in exports, coupled with declining prices, has led to substantial losses in China’s domestic rapeseed industry. China’s domestic rapeseed meal prices have already fallen by 22% this year, exacerbated by an abundant supply of oilseeds and increased domestic production. Analysts suggest that China may turn to Australia and Ukraine for alternative canola supplies if the dispute with Canada escalates.
The Canadian embassy in Beijing has not yet responded to China’s latest actions. Meanwhile, the Chinese government indicated that it might seek resolution through the World Trade Organization’s dispute settlement mechanism. China has previously targeted Canadian canola in trade disputes, notably suspending two major Canadian canola exporters in 2019. Although those restrictions were lifted three years later, the current situation may prompt China to explore other sources, particularly Australia, where canola production is currently robust.