US tariffs on Canadian imports, including a 25pc tariff on potash, have come into effect today after most market participants expected it to either be further delayed or for an exemption on potash imports.
US president Donald Trump signed executive orders on 1 February to impose a 25pc levy on all US imports from Canada from 4 February, although energy imports will have a lower 10pc tariff. This was subsequently postponed to 4 March.
Plans for the tariffs were announced in November, when Trump won the US presidential election, but most market participants did not expect them to be implemented, or expected that potash could be exempt, given that the US relies so heavily on Canadian product. Most sources believed that the threat of tariffs was largely a bargaining tool related to border security.
The US has limited domestic MOP production and more than 80pc of its potash needs are from Canada — 9mn-10mn t/yr of MOP. No other major potash import market relies so heavily on one source. The US also stopped taking MOP from Belarus in 2022 following sanctions, and the lack of Canadian MOP will only further limit supply options.
The upcoming US spring market should largely be unaffected as suppliers have positioned stocks accordingly, but granular MOP prices have been on an upwards trend.
The president of US fertilizer company Mosaic Bruce Bodine said in an earnings call last week that Mosaic expects potash to remain "affordable" and for no demand destruction to occur because of the tariffs. But affordability could change if corn prices fall or potash prices increase. Whether prices could change enough to affect US consumption is unclear.
At a global level, MOP prices remain firm and the implementation of the tariffs today are unlikely to prompt any major change in reactions from key markets. Market participants will keep a close eye on any potential change in trade flows.
Canada has responded with its own retaliatory tariffs on $30bn of US imports, followed by another $125bn of imports in 21 days' time.
