In 2023, Canada imported USD $32 billion in agriculture and agri-food from the US (AAFC), with 67% of Canada’s vegetables and 36% of its fruits coming from south of the border (UBC). But with the current tariffs, and/or threats thereof, coming from both countries and Canadian boycotts of US goods crossing all sectors, there is little question that 2025 will see a decline in those numbers.
In fact, a recent Canadian survey showed that two-thirds of Canadians said they have significantly reduced their purchases of US products, both in stores and online, while food businesses “grapple with how to disentangle supply chains that have been interconnected for decades.”
All in all, it doesn’t bode well for the AAFC tagline on Canada/US food trade: “Let’s keep a good thing growing!”
So how do Canadian food businesses “keep good things growing” in the current trade environment? While there will certainly be some supplies for which businesses will need to grit their teeth and bear the impacts of buying from the US, there are a number steps businesses can take to mitigate the impact and begin reducing dependency on that country down south:
- Diversify supply sources. While direct trade with Mexico has its own challenges, particularly if one wishes to avoid US transportation routes, strengthening these relationships and agreements can provide Canada food businesses with significant produce resources. Additionally, countries in South America (e.g., Chile, Peru, Brazil, Argentina) can provide strong agricultural sectors, free trade agreements, and direct shipping routes; Europe (Netherlands, Spain, France) has an existing trade agreement (CETA), reducing tariffs; Asia-Pacific (Vietnam, Thailand, Australia, New Zealand) can provide resources for seafood, fruits, and specialty foods under the CPTPP agreement; and in the Caribbean, nations can supply tropical produce.
- Explore alternative shipping routes. With a goal of avoiding US transit routes, consider direct transport, such as using sea or air from Mexico to Canada. For example, shipping ports like Vancouver or Halifax can handle direct imports from Mexico instead of relying on U.S. transit routes, and air freight for high-value perishables can bypass land transport restrictions through the US. Additionally, investing in improved cold storage and transport technology can allow for direct sourcing from more distant regions without spoilage.
- Conduct geographic risk assessments. Before adding a new supplier, particularly in a country or area in which you’re not familiar or haven’t previously conducted business, it’s wise to analyze its potential vulnerabilities. Consider geographic factors: Is the area prone to climate change impacts (droughts, floods, extreme temperatures), natural disasters (earthquakes, hurricanes, tsunamis), or geopolitical instability (conflict, trade disruptions). Evaluate the vulnerability of transportation routes, storage facilities, and processing plants to disruptions caused by such factors. Also consider the potential for and susceptibility to food fraud based on the food type, value, and emerging risks. Along with a thorough risk assessment, a robust traceability system, due diligence, and analytical testing can help ensure authenticity in your supplies.
- Implement supplier approvals. You also want to ensure that you have a well-developed supplier review and approval program, to which you subject suppliers prior to contracting with them or receiving goods. Include a hazard analysis of the food, of the entity that will be applying controls for the hazards, and of other appropriate factors (e.g., storage and transportation practices). Then assess supplier performance through a review of its food safety practices related to the raw material and other ingredients, compliance with regulatory requirements, and food safety history relevant to the raw materials or ingredients you plan to source from them. Additionally, supplier verification should be conducted, through activities such as onsite audits, sampling and testing of the raw material or ingredient, review of the supplier’s relevant food safety records, and/or other activities based on risk.
- Add secondary sources. Sole-supplier contracts can provide companies with savings and priority delivery. But if that supplier has shortages (e.g., with numerous Canadian companies attempting to switch suppliers), it can put you at a disadvantage in sourcing alternative options. By building relationships and establishing approval programs with multiple suppliers, you can be better assured that you will have access to the supplies and ingredients your products need.
- Strengthen domestic production. Expanding capabilities in year-round greenhouses and vertical farming can help to increase domestic production of vegetables and fruits, while providing incentives for local farms to invest in regenerative farming can help to retain and restore soil and ecosystem health for long-term production. It also can be advantageous to consider product reformulation to use lower-cost or non-tariffed ingredients, and to focus on premium, differentiated products that can absorb higher costs without losing customers.
No single action will prevent the impacts of the tariffs or worsening trade relations, but by taking steps such as the above, you can help to mitigate the effects, weather the worst of the storm, and come out the other side with some new supply practices to help ensure the continuity of your business.
TAG Canada has extensive experience working with regulatory and industry in both Canada and the US, and can work with you to help you make the best decisions, implement best practices—and keep good things growing for your business!
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