Canadian Produce at a Crossroads

Trade uncertainty, inflation, and supply chain pressures are prompting a focus on collaboration.

Tariffs and inflation are having a profound effect on the North American produce supply chain. While fruits and vegetables continue to move across borders with relatively little disruption from duties, rising costs and added complexities are putting pressure on the system.

As the situation changes, the Canadian Produce Marketing Association (CPMA), Ottawa, Ontario, is doing what it can to ensure that fresh, affordable produce can reach consumers throughout North America and beyond.

“We’re supportive of an open free trade model between all of our trading partners, not only the U.S. and Mexico,” says Ron Lemaire, president. “We’re recognizing the unfortunate position Canada has been in, to have to put in a retaliatory tariff model.”

Lemaire says CPMA lobbies the government of Canada, the Minister of Agriculture’s office and others, “to make sure they recognize food should be excluded from any tariff regime, because the end result is to impact Canadian consumers and the cost of food, which already is an issue relative to food inflation.”

In the long run, anything that disrupts the fresh food supply chain is a detriment to all parties.

“The industry is still looking for the most effective way to get product to market,” says Lemaire. “In North America, it’s proximity. We need each other in Canada, the U.S., and Mexico based on the diversity of product we have and how we move that product quickly to market.

“Not that we can’t work with Turkey and South Africa and Australia, but when you have a market right next to you, and you can easily import product, and it’s what the consumer is asking for, it’s the best business decision to try and move product in through our partnership with the U.S. and Mexico.”

The North American fresh produce industry, including retailers, faces intense margin pressure as inflation has driven every link in the supply chain to find efficiencies.

Lemaire says by the end of 2026 and into 2027, the market may reach the limits of compression, which translates into more costs being passed on to increasingly price-sensitive consumers, and they are unlikely to surrender more money for the same products without complaint or response.

TARIFFS TRIGGER ANTI-US SENTIMENT

The CPMA has continued advocating for the elimination of tariffs, and, along with other organizations, including the International Fresh Produce Association, it was a signatory on a letter to the chief executives of the United States, Canada, and Mexico in support of the United States-Mexico-Canada Agreement (USMCA).

The letter points out that, as members of North America’s fresh produce sector, the organizations strongly support a full 16-year renewal of the agreement.

“Our countries rely on cross-border trade to meet year-round consumer demand and ensure food security,” the letter states. “This complementary, seamless exchange supports growers in all three countries and has historically allowed for efficient and affordable access to a wide variety of fresh fruits and vegetables for the benefit of consumers across North America.”

The current market environment has prompted the Canadian produce industry to expand its focus internationally, seeking new export opportunities and outlets for growers’ products. Although the USMCA remains intact at this point and new duties haven’t impacted covered produce categories, relying on anything in the uncertain trade environment is a substantive risk.

As an importer of fresh produce, J.E. Russell Produce, Toronto, Ontario, has to deal with the direct and indirect costs and challenges arising from the tariff situation, says Hutch Morton, senior vice president.

“The indirect costs of the latest round of tariffs is quite simply the negative consumer sentiment toward anything from the USA,” he says. “Given the outsized share that USA imports of fresh fruits and veg are in the Canadian market, it’s a difficult time.

“Currently, there are no tariffs on any commodities that we are importing from the U.S., but it’s such a volatile time that the instability makes every day a challenge. With the affordability challenges that families in both countries face, nobody wins.”

— Hutch Morton, J.E. Russell Produce, Toronto, Ontario

“Currently, there are no tariffs on any commodities that we are importing from the U.S., but it’s such a volatile time that the instability makes every day a challenge. With the affordability challenges that families in both countries face, nobody wins.”

PRODUCE IS VULNERABLE

Richard Lee, executive director, Ontario Greenhouse Vegetable Growers (OGVG), Leamington, Ontario, says the direct effect of tariffs has been limited because most fresh fruits and vegetables that comply with USMCA rules of origin continue to cross borders tariff-free.

However, that does not mean the industry can afford to become complacent, says Lee. “The produce sector relies on certainty, predictability and efficient cross-border trade. While the current framework continues to support the movement of fresh fruits and vegetables, ongoing trade discussions and the potential for future tariff actions create uncertainty for growers, retailers and consumers alike.”

From a Canadian supply chain perspective, Lee says the greatest concern is not necessarily the impact experienced today, but the risk of future policies that could increase costs or disrupt the flow of food across North America.

“Fresh produce is highly perishable, and any barriers that increase transportation costs, reduce efficiency or complicate market access can have consequences throughout the supply chain.”

“Fresh produce is highly perishable, and any barriers that increase transportation costs, reduce efficiency or complicate market access can have consequences throughout the supply chain.”

— Richard Lee, Ontario Greenhouse Vegetable Growers, Leamington, Ontario

Lee says OGVG will continue advocating “for policies that avoid unnecessary harm to the food system. The industry supports a rules-based trading environment that allows produce to move efficiently across borders, encourages investment and protects consumers from additional cost pressures during a time when food affordability remains a significant public concern.”

As things stand, tariffs have created more uncertainty than actual shortages of fruits and vegetables, says Dr. Sylvain Charlebois, professor, senior director, Agri-Food Analytics Lab, Dalhousie University, Halifax, Nova Scotia.

“Most fresh produce moving between Canada and the United States has remained tariff-free when CUSMA (Canada‑United States‑Mexico Agreement)-compliant,” he says.

He adds, however, repeated tariff threats have complicated contracting, investment and sourcing decisions. “Produce is especially vulnerable because companies cannot stockpile perishable products. Even when fruits and vegetables are not directly targeted, tariffs on packaging, equipment, fertilizer or transportation inputs can raise costs throughout the chain.”

The continued health of the North American supply chain is especially important when food affordability is considered

“Any tariffs applied to food products, directly or indirectly, ultimately add costs somewhere in the supply chain,” says Lee. “Those costs are difficult to absorb indefinitely and can eventually contribute to higher prices at retail.”

He expects the North American produce sector will remain highly integrated because consumers continue to demand year-round access to fresh fruits and vegetables. “Canada, the United States and Mexico each play important and complementary roles in meeting that demand.”

THE BIG PICTURE

Although tariffs get a lot of attention, Charlebois notes much of what Canadian produce growers face is what producers face everywhere across North America.

“Weather and the Canadian dollar remain more important short-term price drivers than tariffs,” he says. “Canada imports substantial volumes of fruits and vegetables, particularly during winter, so a weaker dollar is quickly reflected in wholesale costs.”

Charlebois says labor is another major constraint, along with fuel, fertilizer, refrigeration, insurance and trucking costs. “Growers face higher wages, housing costs and continued dependence on seasonal foreign workers.”

Lemaire explains CPMA works to ensure agricultural inputs are not negatively affected by tariffs or regulations that increase production challenges and costs, which can ultimately lead to higher food prices.

“Underneath one of the Canadian tariffs on the U.S. is a tariff on packaging,” he says. “There now is an exclusion relative to packaging for food products. That’s part of our work to make sure food doesn’t get caught in having added costs.”

Lee says the greenhouse sector, as it operates in Ontario, faces a host of challenges, including rising operating costs in labor, energy, packaging, fertilizer, financing, insurance and transportation costs, placing considerable pressure on business margins.

“At the same time, the sector operates within a highly integrated North American supply chain, making efficient cross-border transportation essential to its success.”

Although transportation isn’t tariffed, duties can affect produce operations.

“For many growers, transportation has become both more expensive and less predictable than it was prior to the pandemic,” says Lee. “Rising freight rates, driver shortages, supply chain disruption and regulatory changes have added costs and complexity to moving products throughout North America. These pressures come on top of the broader inflationary environment that growers have been managing over the last several years.”

J.E. Russell’s Morton says the cost of freight for its imports has increased, specifically the cost of fuel since the war in Iran started. “It hurts because it’s not possible to pass that increase along to our customers entirely, so margins get hurt, as does overall volume, when prices are just too high.”

Tariffs and other pressures create complications, Lee says, but the U.S. remains a critical market for Canadian growers, so continued access, including reliable transportation webs, is critical to maintaining a competitive market environment.

“Ontario growers have built strong customer relationships and integrated supply chains across North America, but their success depends on the efficient movement of goods across the border,” Lee says.

RETAIL DEVELOPMENTS

On the retail end, supermarkets and other food sellers across Canada have been active in responding to inflation and other developments in the marketplace, says Charlebois, using more promotions, loyalty offers, private-label products and flexible sourcing.

He notes consumers are also trading down, buying more discounted produce and switching between fresh, frozen and canned products.

“Retailers are pressing suppliers for efficiencies, but they cannot absorb every increase indefinitely. When costs persist, consumers eventually see higher prices, smaller packages or reduced variety. Competition among retailers can delay an increase, but it cannot eliminate the underlying cost.”
Retailer Loblaw, Brampton, Ontario, has placed some emphasis on its hard-discount No Frills supermarket chain, and in June, Loblaw, opened a No Frills location in Brockville, its 200th store in Ontario.

Loblaw also opened multiple Maxi stores in 2026, a deep-discount supermarket operating mainly in Quebec.

In a second-quarter conference call, Richard Dufresne, chief financial officer, Loblaw Companies, said the company’s hard discount banners continued to perform well in the quarter, with comparable sales close to 4%. “Maxi and No Frills remain well-positioned for customers focused on value, supported by strong execution in both existing and new stores.”