I am back from the annual USAEDC (US Agricultural Export Development Council) Conference in Baltimore - yes, I get to go to all the most exciting places to give keynotes 😅.
Of course, being surrounded by people who are interested in making sure that trade and export flow freely, one of the main subject matters was the election and the coming Trump Presidency. Whatever the political affiliation of the attendees might have been, everybody agreed that free trade is essential to create food security. And free trade is under threat, as Trump is threatening to slap a 25% tariff on all goods imported to the US from Mexico and Canada.
But what would that actually look like?
First, let me explain how tariffs work, because they're simpler than many people think: They're basically a tax that makes imported goods more expensive than those made at home.
Here's an example from close to home: Right now, Canada sets strict quotas on European cheese imports. Any cheese that exceeds these quotas gets hit with a whopping 245.5% tariff. That's why you rarely see certain European cheeses in Canadian stores - they'd be ridiculously expensive compared to Canadian-made alternatives. The bad news for Canadian cheese lovers is that the government is effectively restricting choice, no matter the quality, in order to protect home made products.
Personally I dislike these kind of protectionist actions greatly. They do a disservice to the consumer, restricting access to quality goods, and to the Canadian manufacturer, disincentivizing innovation and the creation of quality products that can compete on merit.
Now imagine you're standing in your local grocery store in the US, staring at $8 avocados and $7 orange juice. This isn't a dystopian future-it's what could happen if Trump's proposed 25% tariffs on Canadian and Mexican goods become reality.
Will he do it? I think it's unlikely that he will hit his audience in the wallet, given that people are already complaining about high food prices, inflation or not.
But if tariffs do get implemented, nobody in the food industry, in the US and in Canada, is truly prepared for this seismic shift, mostly because we have spent the last few decades creating systems that rely on open borders, friendship and free trade - and none of these mean much to Trump.
Let me break down what's at stake here: Two-thirds of US vegetable imports and half of fruit and nut imports come from Mexico, while Canada supplies about 20% of US fresh vegetables. These are the supply chains that keep US grocery stores stocked year-round. And tariffs would throw a massive wrench into this system.
In 2023, the US imported $40.5bn worth of agricultural products from Canada, including baked goods, canola oil, beef, pork, chocolate, and frozen fries. Agri-food sectors such as livestock, grains, seafood, and fresh produce are most at risk from Trump's tariff threats.
US consumers will experience immediate sticker shock at supermarkets, while restaurants will have to raise menu prices or reduce produce portion sizes. Canadian growers and manufacturers will find themselves with severely impacted margins.
But there's even more complexity: Many products don't just cross the border once-they zigzag back and forth during processing. That General Mills box of cereal in your pantry? The oats it contains likely crossed the border multiple times before reaching your breakfast table, and General Mills in the US imports most of their oats from Canada.
The Perfect Storm for Inflation
If Trump delivers on his threats, we're looking at a potential perfect storm for inflation, and here's why:
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Direct Price Impacts: When $14 billion of Canadian grains flow into the US market each year, a 25% tariff is a shock wave through the entire food system, both in Canada and the US. Take Alberta alone: in 2023, the province sent $8.79B worth of food and agriculture products to the US - that's nearly half of everything they produced. We're talking about 90% of their bovine meat ($2.9B), 100% of their live cattle exports, and 85% of their canola.
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The Oil Factor: Canada isn't just sending food to the US. It's also a major oil supplier. Higher gas prices mean higher transportation costs for US consumers and businesses, which mean... you guessed it, even higher food prices as logistics take a hit.
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Supply Chain Ripple Effects: When costs rise at every border crossing, the final price tag multiplies faster than you might expect.
Looking Beyond North America
So what can food companies do to protect themselves? Well, while everyone else is panicking about North American trade, smart companies are already looking across oceans.
Europe, with its 447 million consumers and strong purchasing power, offers huge opportunities and loves Canadian products. And with ongoing sanctions against Russia creating supply gaps in everything from grains to seafood, there's never been a better time to enter European markets.
Southeast Asia, with its rapidly growing middle class of 350 million people, might be an even better bet - especially since they're also actively seeking high-quality North American products.
But entering these markets isn't as simple as shipping your products and hoping for the best. You need to understand them deeply. And this is where our AI and data tools give you an advantage your predecessors never had.
Using AI to Crack New MarketsLet me share what I'm seeing innovative companies do right now:
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Market Intelligence on Steroids
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Our AI tools analyze trillions of global datapoints, including retail sales numbers, foodservice orders and in-home dining. Across these markets we help our clients understand what consumers really want
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We're helping companies use this data to adapt their products before they even enter a market
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Smart Distribution Planning
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AI can map out optimal distribution networks in new markets
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It can predict which retailers are most likely to succeed with your products
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You can simulate different pricing strategies before committing
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Product Adaptation
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We're helping companies use AI to analyze local taste preferences
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It can suggest product modifications that will resonate with local palates
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One Canadian snack company used this to create Asia-specific flavors that became bestsellers
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The Real Opportunity
Here's what excites me: we can use this disruption to build something better. Companies that use this moment to diversify their markets will end up with stronger, more resilient businesses, whatever Trump decides to do.
The tools are there. The markets are waiting. The question is: who will move first?