A trade war with the United States is weighing on food and beverage manufacturing sales in Canada.

A report from Farm Credit Canada (FCC) shows sales rose just 0.8 per cent in the first half of 2025, before slowing to 0.3 per cent growth by year’s end.

FCC senior economist Amanda Norris said sales growth largely depends on pricing and volumes. She noted that between 2017 and 2019, nominal food and beverage manufacturing sales grew at an average annual rate of 3.6 per cent. From 2023 to 2025, that pace slowed to 2.6 per cent.

“If we take out the impact of inflation, real sales increased at an average annual rate of 2.5 per cent between 2017 and 2019 and declined at an average annual rate of 1.6 per cent between 2023 and 2025,” Norris said.

She said margin performance across the sector was mixed in 2025. Grain and oilseed milling, sugar and confectionery, fruit and vegetable preserving and specialty foods, meat and seafood all saw margins improve.

Dairy margins were relatively stable, she said, while bakery and beverage manufacturers faced margin pressure.

Manufacturing volumes mixed 

Norris said sales growth in 2025 was driven by higher prices rather than increased volumes. Total sales rose 1.7 per cent from 2024, while selling prices increased 4.4 per cent.

“This implies volumes declined year over year, underscoring that manufacturers are still struggling to generate meaningful volume growth in the current demand environment,” she said.

Despite easing input costs in recent months, Norris said food and beverage manufacturers faced elevated prices and uncertain market conditions through most of 2025. That contributed to a slight decline in margins compared with 2024.

“Margin conditions began to improve in the second half of the year, and with further input cost relief expected in 2026, we anticipate margins to rise above 2025 levels this year,” she said.

Trade war takes toll on manufacturing

As U.S. trade policy remains unstable, Norris said Canadian food and beverage manufacturers remain exposed to trade uncertainty heading into 2026, largely because the sector is highly export oriented.

Subsectors with a larger share of sales tied to export markets continue to face elevated risk, she said.

“There have been some positive developments, including an agreement with China to temporarily lower tariffs on canola meal and some seafood products through the end of 2026,” Norris said. “While this offers short-term relief, manufacturers should expect further trade announcements before year end.”

At present, nearly all food and beverage manufacturing exports to the United States are entering tariff-free under CUSMA, Norris said. Any changes to those exemptions would have a meaningful impact on the sector.

She said signs of a rebound in 2026 will vary by subsector. Grain and oilseed processors and seafood producers will be watching whether lower tariffs translate into stronger trade flows with China.

“Meat processors will be focused on the pace of cattle herd rebuilding across North America,” she said. “Grain millers and bakeries will be monitoring planting conditions and the growing season.”

Is Canada headed for recovery?

Norris added that beverage manufacturers, particularly soft drink producers, may see opportunities to expand domestic processing as imports continue to meet rising consumer demand.

“In British Columbia, wineries will be looking for a return to normal winter temperatures to support grape production recovery,” she said.

She added potential delays to a rebound include slower population growth and weaker gains in disposable income in Canada and the U.S., adverse weather limiting crop supplies, animal disease outbreaks such as avian influenza, and a continued consumer shift away from alcoholic beverages.