(Bloomberg) -- China will start an anti-dumping probe into rapeseed imports from Canada, with trade tensions escalating after Justin Trudeau’s government imposed tariffs on Chinese-made electric vehicles, steel and aluminum.
The Asian nation is initiating measures following relevant restrictive actions taken by Canada, according to a statement from the Ministry of Commerce. China will take all necessary actions to safeguard the legitimate rights and interests of Chinese companies, the agency added.
Canada last month announced a 100% levy on electric cars and 25% on steel and aluminum, joining western allies to protect domestic manufacturers. Rapeseed is used to crush into oil for cooking and fuel and meal for feeding animals, and China is the world’s second-biggest importer of the commodity.
The most actively traded rapeseed meal and rapeseed oil futures on China’s Zhengzhou Commodity Exchange surged at least 6% on Tuesday. Canola futures in North America fell by the exchange limit in the biggest intraday loss since August 2022, on fears that lower Chinese demand could result in a glut at home.
Canola and oilseeds in general have been under pressure from world supplies that were expanding faster than demand. The move could halt Canada’s canola shipments to China just as farmers were harvesting their fields.
“Everybody is a bit overwhelmed this morning,” said Jerry Klassen, market analyst and commodity trader at Resilient Capital in Winnipeg, Manitoba, adding that the tariffs have yet to be confirmed. “When these things occur, it alters trade flows.”
More than 90% of China’s total rapeseed imports last year were from Canada, totaling 5.05 million tons, according to Chinese customs data. The variety of the crop grown in Canada is also known as canola.
Canadian Agriculture Minister Lawrence MacAulay in a statement Tuesday said the announcement was “deeply concerning.”
“I am working with my colleagues across government and in the sector to monitor developments closely,” MacAulay said. “We will continue to defend and support the sector every step of the way.”
China has targeted Canada’s trade before, halting shipments of canola in 2019 following the arrest of a top Huawei Technologies Co. executive in Vancouver on an American extradition request. The Asian nation has recently launched other probes, including into dairy imports from the European Union.
Canada was suspected of dumping rapeseed shipments, and such unfair trade practices have caused losses locally, the ministry in Beijing said, citing an appeal from the domestic sector.
Fewer shipments of canola from Canada could prompt China to buy more from Australia; meanwhile, Canada may ship more supplies to Japan or the European Union, Klassen said.
Relatively minimal inflation in vegetable oil in China is enabling the government to focus on imports in the trade dispute. “It’s one area they can target without having serious implications to the population,” Klassen said.
Palm oil futures rose more than 1% in Malaysia on speculation that the probe may spark increased demand for alternative oilseeds before erasing gains to finish slightly lower. Soybean futures were higher in Chicago.
--With assistance from James Mayger, Eko Listiyorini, Celia Bergin and Laura Dhillon Kane.
(Adds Canada comment in eighth paragraph.)
©2024 Bloomberg L.P.
