Oil price spike from Iran war could help Canada in CUSMA talks, experts say – National
Countries around the world are facing rising costs of essential commodities such as oil and fertilizers as the war with Iran continues to increase global trade.
As it stands, this fight could have a shadow on trade negotiations ahead of the mandatory revision of the Canada-US-Mexico Trade Agreement (CUSMA) – and could ultimately give Canada more leverage in those negotiations.
“If you’re sitting in Washington and you’re seeing what’s happening in the world markets, you’re going to be looking at your protected producers and suppliers maybe a little differently than … you might have looked at them before the conflict started, which was only in terms of tariffs,” said Fen Osler Hampson, a professor of international affairs at US C. Relations.
Crude oil and natural gas prices rose after Iran closed the Strait of Hormuz in response to the United States-Israeli bombing campaign.
A fifth of the world’s oil is usually shipped.
But oil and gas are not the only things involved.
Fertilizer and potash applications are also being raised, causing land prices to rise with only a few weeks left before the planting season.
American farmers are already feeling the pain of US President Donald Trump’s volatile foreign and trade policies. The Trump administration offered a bailout last year after farmers grappled with rising costs and declining sales due to the president’s global spending spree.
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Aluminum prices also jumped after the start of the Iran war, sending shock waves through US industries already facing Trump’s separate 50 percent tariffs on the product.
Canada is another supplier of many of those essential goods. Trump has repeatedly said that America does not need anything from Canada; the war in the Middle East may suggest otherwise.
“All of a sudden, close partners, who you may have had a little bit of an adversarial relationship with … it might be time to play nice because they have things (Trump) wants in bulk,” Hampson said.
Relations between Canada and the United States have been strained by Trump’s tariffs and his repeated calls for Canadian annexation. Trump called Prime Minister Mark Carney a “governor” on social media earlier this week.
Officials from Canada and Mexico have been preparing for tough talks over the continental trade agreement known as CUSMA, which has shielded both countries from the worst effects of Trump’s tariffs.
Trump has questioned his commitment to CUSMA, which was negotiated during his first administration. The president called the deal “irrelevant” and said it may have served its purpose.
The CUSMA review sets up a three-way choice for each country to make in July. They can renew the agreement for another 16 years, withdraw from it or signal both non-renewal and non-renewal – which would trigger an annual review that would keep the talks going for a decade.
Trump has had more power to enter into the CUSMA review. His ever-changing tax policy kept Canada and Mexico on the sidelines and slowed investment as businesses in both countries sought to stabilize.
The Trump administration also has other tools to pressure the United States’ immediate neighbors.
The Department of Justice recently launched an antitrust investigation into fertilizer manufacturers — including Saskatchewan’s Nutrien — in connection with the dispute and price-fixing, Bloomberg reported last week.
The Saskatchewan government is aware of the investigation, the province’s Department of Energy and Resources said in a press release.
“Fertilizer is a globally traded commodity in a highly competitive environment,” the statement said. “The price is determined by the market, not the manufacturing companies.”
While it’s unclear whether that investigation is directly linked to the CUSMA negotiations, potash is on the Trump administration’s mind as the war with Iran continues.
Luke Lindberg, the under secretary for trade and foreign agricultural affairs at the US Department of Agriculture, told Politico recently that “any company or any part of the fertilizer supply chain that tries to use this opportunity to drive prices down for American farmers and ranchers will not be tolerated, and I think that’s a very clear message.”
The Iran conflict and the price shock it has caused should remind Washington that the United States is dependent on other nations when it sits down to discuss the future of CUSMA, said Inu Manak, senior international trade officer at the Council on Foreign Relations.
“We need to have partners we trust if we are to really face some of these challenges and survive these disasters,” said Manak.
As a major commodity producer, Canada is important to America’s industrial base, he added, pointing to potash, oil and the combined market.
“I think in some ways, the mindset going into the negotiations now might change a little bit and give Canada a place to focus on those issues and say, ‘Look, we want to work with you. We’ve worked with you for a very long time. Here are things we might do to strengthen those bonds rather than weaken them,'” he said.
Manak said Canada may also have gained strength from the growing unpopularity of the Iran war among Americans – who are preparing to go to mid-term elections in November.
That doesn’t mean Trump’s threats will stop, he added.
“Bound up a lot of uncertainty.”
– Via files from the Associated Press
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