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Navigating Tariff Tensions - Impact on Horticulture and CEA
The Ripple Effect: How Tariffs Affect the Horticulture Industry
Corenthin (Félix) Chassouant
March 13, 2025
The North American horticultural and controlled environment agriculture (CEA) industries are highly integrated, with significant cross-border trade. Recent discussions about potential tariffs on Canadian goods raise concerns about disruptions and increased costs within this interconnected market. This edition of Horti-Gen Insights examines the possible implications of such tariffs, focusing on key areas like media imports, commodity products, greenhouse structures, and the downstream effects on consumers. Furthermore, we'll touch upon the broader context of tariffs on Mexican produce and their collective impact on the American market.
Table of Contents
🚀 The 2025 USA Indoor Farming Report is Here! 🌱
We’re excited to announce the release of the 2025 USA Indoor Farming Report, packed with industry insights, investment trends, and technological advancements shaping the future of controlled-environment agriculture (CEA).
A huge thank you to our sponsors TTA-ISO & Grow-Tec for their support and to Renko Schuil, Shlomy Razhiel, Corenthin Chassouant, and Neda Vaseghi for sharing their expertise and valuable insights in this edition. Your contributions help drive meaningful conversations about the future of indoor farming!
Impact on Media Imports
Peat moss is a critical growing medium, and Canada is a major supplier to the United States. Tariffs on peat moss would directly increase growers' costs, impacting various sectors, from ornamental plant production to vegetable seedling propagation.
Potential Effects:
Increased Input Costs: Tariffs would translate directly into higher prices for peat moss, squeezing profit margins for growers.
Supply Chain Disruptions: Any barriers to importing peat moss could disrupt established supply chains, leading to potential shortages or delays.
Search for Alternatives: Growers might seek alternative growing media such as coco coir, compost, or wood fiber. However, transitioning to new media requires adjustments to growing practices and may not be suitable for all crops.
Major Canadian companies likely to be significantly impacted by the 25% import tariff from Canada to the USA include Sun Gro Horticulture, Berger, Premier Tech, Lambert Peat Moss Inc., and Theriault & Hachey Peat Moss Ltd., all of which are leading producers and exporters of peat moss and horticultural growing media to the U.S. market.
Impacts on Commodity Products
Beyond peat moss, Canada exports various other commodities vital to the U.S. horticulture and CEA sectors. These include fertilizers, certain types of seeds, and other specialized inputs.
Potential Effects:
Fertilizer Costs: Increased costs for Canadian-sourced fertilizers would impact the bottom line for growers of all types of crops.
Seed Availability: Tariffs on seeds could affect the availability and price of specific varieties, potentially impacting crop selection and yields.
Ripple Effect: The increased cost of these essential inputs would likely be passed on to consumers through higher prices for fruits, vegetables, and ornamental plants.
The implementation of Trump's tariffs on Canadian fertilizer imports, particularly potash, is poised to significantly impact the American greenhouse and horticulture industry. Despite a reduction from 25% to 10% on potash tariffs, The Fertilizer Institute warns of impending price increases.
In fact, with Canada supplying 85% of U.S. potash imports and nearly 10% of nitrogen fertilizer needs, these tariffs could disrupt well-established supply chains, potentially leading to shortages or delays. Greenhouse operators and horticulturists may face difficult decisions, including reducing fertilizer usage—which could affect crop yields and quality - or passing increased costs onto consumers. This could result in higher prices for greenhouse-grown produce and ornamental plants, potentially altering consumer purchasing behavior. The situation remains dynamic, with temporary exemptions in place until April 2, 2025, necessitating close monitoring by industry stakeholders.
Greenhouse Structures and Equipment
Canada has several reputable manufacturers of greenhouse structures and related equipment. Tariffs on these products could impact expansion and modernization efforts within the U.S. CEA industry.
Potential Effects:
Increased Capital Expenditures: Tariffs would make it more expensive for U.S. growers to invest in new or upgraded greenhouse facilities.
Delayed Expansion: Due to increased costs, some growers might postpone or scale back expansion plans.
Reduced Competitiveness: Higher capital costs could make U.S. CEA operations less competitive than those in regions with lower input costs.
The 25% import tariff will affect Canadian greenhouse manufacturers and severely impact U.S. greenhouse structure manufacturers. These manufacturers heavily rely on imported materials and equipment, leading to increased costs and potential supply chain disruptions.
Latest news: As of March 13, 2025, the 25% tariffs on steel and aluminum imports have taken effect, increasing costs for North-American greenhouse structure and equipment manufacturers and potentially disrupting supply chains. These tariffs apply broadly, impacting the entire supply chain and likely leading to higher costs for greenhouse construction and equipment, affecting growers and consumers alike.
Response from the Canadian government:
https://www.canada.ca/en/department-finance/news/2025/03/canada-responds-to-unjustified-us-tariffs-on-canadian-steel-and-aluminum-products.html
Consumer Impacts and Purchasing Decisions
Ultimately, the costs associated with tariffs will likely be passed on to consumers. This raises questions about how these increased prices affect purchasing decisions, particularly for non-essential items like flowers.
Potential Effects:
Price Inflation: Consumers could see higher prices for flowers, potted plants, and greenhouse-grown fruits and vegetables.
Shifting Demand: Consumers might reduce discretionary purchases like flowers, impacting the floriculture industry.
Prioritizing Essentials: With higher food prices, consumers may prioritize spending on essential items like greenhouse-grown produce over ornamental plants.
In fact, the U.S. greenhouse landscape is dominated by flower growers, who are heavily dependent on spring weather conditions and consumer willingness to purchase flowers during this critical season. As tariffs lead to higher prices, consumers might reduce discretionary spending on flowers, impacting the floriculture industry, while prioritizing essential items like greenhouse-grown produce.
Additional Impact on Mexican Produce
The potential tariffs on Canadian goods occur against a backdrop of existing trade tensions involving Mexican produce. Proposed tariffs on Mexican tomatoes, bell peppers, and chili peppers would further exacerbate the situation.
Potential Effects:
Compounded Price Increases: Tariffs on Canadian and Mexican goods would lead to even higher consumer prices.
Reduced Produce Availability: Tariffs could reduce the availability of certain types of produce, particularly during specific seasons.
Impact on Restaurants and Food Service: Higher produce costs would impact restaurants and the food service industry, potentially leading to menu changes or higher prices for diners.
Market feedback from the Indoor Ag-Con, Vegas
The Indoor Ag-Con in Las Vegas showcased the resilience and optimism of the CEA industry, featuring new Cultivating Excellence Awards, discussions on tariffs, diverse educational tracks, and networking opportunities, all while expanding its focus to include a wider range of crops and attracting over 200 exhibiting companies.
The recent tariff announcements and potential for retaliatory measures have created significant uncertainty in the Controlled Environment Agriculture sector, with many companies, including suppliers and growers, struggling to navigate the complex and rapidly changing trade landscape.
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Conclusion
The potential tariffs on Canadian goods and existing trade tensions involving Mexico create uncertainty and potential challenges for the U.S. horticulture and CEA industries. While the full impact remains to be seen, growers, retailers, and consumers should prepare for potential price increases and supply chain disruptions.
Staying informed, exploring alternative sourcing options, and advocating for policies that support fair trade will be crucial for navigating these challenges.
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