It has surely been a week of surprises. Remember just a few weeks ago we were all talking about the moratorium of understanding between Iran and the United States. That moratorium of understanding was supposed to last 60 days and I asked the question what happens after that? Of course, it's all a moot point now as all of us know missiles and bombs have been flying both ways in the vicinity of the Strait of Hormuz for several days. It has sent energy prices up and along with it grain prices have followed.

However, that might not have been the biggest surprise that came along last week. From a Canadian perspective, many of us were gobsmacked when the U.S. administration announced new 50% tariffs on Canadian goods entering the U.S. These included alcohol, dairy products, hockey sticks, floriculture products, flower bulbs, lumber and animal products as well as several other things. Many of the new measures took aim at items -- in spite of the Canada-United States-Mexico Agreement -- using the Tarriff Act of 1930 to impose these tariffs. For the most part, the reaction from Canada was disgust. The American administration did this despite Canada being a bigger buyer of U.S. products than the UK, France, Japan and China combined.

If you have read this column during the last 39 years, you will have always known my opinion about our U.S. friends when it comes to free trade. I documented the first free trade agreement that was signed with the U.S. in 1989, the North American Free Trade Agreement (NAFTA) after that, and of course the USMCA or CUSMA, which was signed under the last Trump administration. At the time, U.S. President Donald Trump said that was the greatest trade deal ever, but of course now it lies in tatters subject to annual reviews without the support of the Americans. In my view, since 1989 free trade is whatever the Americans deem it to be. With the fresh tariffs put on Canada, but also the rest of the world during the last few days, that certainly is again the case.

However, remember we must not be emotional about this. Simply put, this Trump administration has chosen a radically different trade policy for the U.S. versus past administrations. For countries like Canada, it's incredibly tough, not only because we are America's biggest trading partner but also because of our shared history and culture. When the 50% tariffs were announced, there was a 30-day grace period until they come in effect on Aug. 19, 2026. This has put renewed pressure on our federal government to stick handle some arrangement before that date. If we get to that date and nothing happens, then of course, we'll have to have a strategy for that as well. It's a pretty tough call especially when you're dealing with a U.S. administration that seems to change trade policy quickly and on a whim.

I do not know what will happen. It has been very difficult to get any agreement with the Trump administration. Threats to Canadian sovereignty haven't helped either Canadian energy or Canadian potash were not tariffed. However, anytime dairy is mentioned, eastern Canada tightens up a little bit. You know my view; I support supply management. Selling Canadian milk like I sell corn makes no sense. There should be no backing down, not even one millimetre.

It should not be lost on us that the U.S. administration might be making radical changes to its trade policy, but the country is still conducting a war surrounding the Strait of Hormuz. That sent the price of oil almost up to $100 US yesterday. Keep in mind, the roller coaster in grain prices has been attributed to missiles and bombs in Iran and the Middle East affecting the oil market. As always, I am hoping for peace to break out, but from where I'm sitting, it certainly doesn't look like it now. That should keep the U.S. government busy for the near future. It might also affect how ultimately the country decides on its final trade policy decisions.

That certainly creates all kinds of uncertainty and as we all know markets hate uncertainty. In fact, you could argue that the grain fundamentals tell us there's lots of grain out there, but of course all this uncertainty is putting a premium in our grain market. There is widespread drought in Europe, as well as a little bit of nervous dryness in the U.S. Midwest and in Ontario. This crop is not in the bin yet and with all the uncertainty out there its value is certainly volatile. Who knows, maybe it will ultimately take off some more.

On my farm it is very dry and I'll take lots of rain any day now. Otherwise, things are going to start moving backwards really fast. We don't want that. Uncertainty seems to be growing not only in the weather but also in our markets and our trade policy.

The challenge for Ontario and Quebec farmers will be to recognize this is bigger than one tariff or one administration. It is about whether Canada and the U.S. continue to believe that prosperity is built by trading with each other instead of trading against each other. I have watched this relationship for almost 40 years, and it has never been under this much strain. I still have faith that common sense will eventually prevail.

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Philip Shaw can be reached at philip@philipshaw.ca

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