The U.S.-China trade war is a boon for Atlantic Canada’s lobster harvesters. But what’s the catch?

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Inside a grey warehouse on the edge of Nova Scotia’s Eastern Shore, workers in white coveralls are packing 3,000 pounds of live lobsters into insulated boxes. They need to work quickly – these lobsters are bound for the airport, where a chartered cargo plane will deliver them to Asia within 48 hours.

With Chinese New Year celebrations looming, it’s a busy time at the Tangier Lobster Company, an 18-person operation tucked down a dirt road about an hour and a half outside Halifax. Trucks come and go daily with thousands of lobsters plucked from the Atlantic Ocean only hours earlier. Within days, the shellfish could be on dinner plates from Shanghai to Shenzhen.

“Increasingly, our focus has been China, China, China,” said Stewart Lamont, Tangier’s managing director. “China is a market entrant like no other, and we’ve never seen anything like this before.”

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A trade war between Washington and Beijing has been a boon to Nova Scotia companies such as his, with lobster fishermen around the province now getting more than $10 a pound for their catches. A year ago, those same lobsters fetched $7.50 a pound.

That price hike owes a lot to U.S. President Donald Trump, who slapped tariffs on a wide range of Chinese products last year – only to have Beijing retaliate with a 25-per-cent levy on billions of dollars’ worth of U.S. goods, including lobster.

In response, Chinese seafood importers started buying more Canadian lobster – a lot more.

Exports of Canadian lobster rose to a record $266-million from $112-million in the 18 months between January, 2018, and June, 2019. Meanwhile, U.S. exports have plummeted, especially in Maine, where live lobster exports to China collapsed by 81 per cent between June, 2018, and the same month this year.

It’s all pumping millions of dollars into Atlantic Canada, fuelling a boat-building boom, sending pickup-truck sales soaring and giving lobster crews six-figure salaries, a significant raise from the recent past.

“This has changed everything. There’s been nothing even remotely comparable,” said Mr. Lamont, whose company buys from a network of more than 40 lobster dealers around the region.

“We are so grateful for Donald J. Trump. We are in a very unique position thanks to this trade war, and he started it all. I’m sure he doesn’t realize the extent to which Canada has benefited.”

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For those who harvest lobster from the region’s waters, the exploding Chinese market is putting more money in their pockets even while lobster catches are some of the best they’ve ever been.

“The entry of the Chinese has been phenomenal for Atlantic Canada’s lobster industry. It’s really the best we could hope for,” said Colin Sproul, president of the Bay of Fundy Inshore Fishermen’s Association, which represents 175 crews in the region.

Mr. Sproul says Chinese buyers have had another important effect on the industry: They’re offering an alternative to the major seafood processors and exporters who have traditionally set lobster prices in the region.

“For the first time, we’ve seen outside influences break the lock of that cartel on prices in Atlantic Canada. The result has been incredible economic benefit,” he said.

“We’re finally receiving a fair price for our product.”

Canada now controls about 85 per cent of the Chinese lobster market, said Geoff Irvine, president of the Lobster Council of Canada. A few years ago, it was evenly split with the U.S.

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Nova Scotia’s government, meanwhile, has been rushing to get more fresh seafood to buyers in Asia. Last November, it announced plans for a new $36-million cargo facility to ease the freight bottleneck at Halifax Stanfield International Airport. Cargo planes packed with 150,000 pounds of live lobster now leave the airport every other day.

Canadian exporters say they need even more flights to meet the rising Chinese demand and are limited only by logistical challenges, not finding buyers. In Yarmouth, home to Canada’s largest lobster fishery, there are calls to modify the local airport to accommodate larger Boeing 747 cargo jets. “All the cargo flights are already full, and they’re all full of lobster,” Mr. Sproul said.

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While the Chinese market has an obvious upside, Mr. Lamont is concerned that Chinese buyers, often working through Nova Scotia-registered companies financed from China, are driving up the price of lobster to unsustainable levels. That can cause problems for the industry over the long term, he said. “We’re now paying frequently unrealistic prices for the resource. It’s a wonderful thing for our harvesters to be making a substantial income, but we can’t always pass that increase on to the marketplace,” he said. “This isn’t a pure success story.”

Jiu Chang, president of Capital Seafood International in Eastern Passage, N.S., disagrees that Chinese buyers are driving up the price. His company, bought by Chinese seafood giant Zoneco Group Co. in 2014, exported more than a million pounds of live lobster to mainland China last year and expects to sell even more this year.

Mr. Chang believes the factors pushing prices skyward are concerns over supply and early signs that harvests are slowly declining. A rising price hurts Nova Scotia-based exporters like him who are trying to convince Chinese shoppers to buy Canadian shellfish, he said.

“It’s the fear that’s driving up the price," he said. “The majority of Chinese markets are still buying Canadian lobster, but if our price goes up too quickly and too high, we’re going to leave more room for American lobster in China."

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Many in the industry are wondering what happens when the United States and China resolve their trade spat, Mr. Irvine said. If the U.S. can go back to selling lobster for significantly less than the shellfish coming out of Canada, it’s widely expected many buyers will return to New England suppliers. Mr. Chang points out that lobster from the U.S. has traditionally been cheaper and has the advantage of direct flights out of Boston or New York that get it to China more quickly.

Mr. Sproul and others also worry that China could impose restrictions on Canadian lobster, as it did with canola seed, if Canada’s diplomatic relations with Beijing don’t improve.

“You’re always one embargo away from jeopardizing everything. This is the new normal,” said Sylvain Charlebois, a professor in food distribution and policy at Dalhousie University in Halifax. “Right now they’re out, they’re fishing, they’re getting lobster. Hopefully they’ll be able to ship as many as they can, but it’s just not sustainable to think that way.”

The only way for the industry to sustain sales in China after the U.S. trade dispute ends is to convince consumers that Canadian lobsters, with their harder shells and meatier bodies due to colder waters, is a premium product worth paying more for, Prof. Charlebois said. Unless it’s properly branded where it’s sold, Chinese shoppers may not even know they’re buying Canadian lobster, he pointed out.

The hope among many in Atlantic Canada’s industry is that the supply chains and relationships built up with Chinese clients in recent years will allow some of that new business to remain. China has a growing middle class that sees lobster as a coveted status symbol, shared communally during special meals. And Canadian lobster still remains cheaper than rock lobster from Australia or New Zealand, Mr. Chang said.

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Canadian lobster has been through boom-and-bust cycles before. During the global recession, the same fishermen now driving brand-new Ford F-150s and renovating their homes were getting as little as $3 a pound for their catches. Many boat owners struggled to secure loans, prompting Ottawa to offer bailouts across the industry.

Today, auto dealerships in southwestern Nova Scotia say it’s not uncommon for fishermen to pay $65,000 in cash for a high-end truck. The spending spree also extends to new fishing vessels with price tags of more than $1-million. The Nova Scotia Boatbuilders Association says its members are scrambling to meet orders and have a backlog of several years.

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Fishermen are ordering new boats with larger live wells and aeration systems, allowing them to hold bigger catches and travel further. They’re willing to spend extra on creature comforts such as satellite TV, laundry facilities, showers, full kitchens and even private quarters so they can work through the night and stay at sea longer.

“Historically, no one has seen anything like this before. It’s night and day different from what we saw 10 years ago," said Fraser Challoner, co-owner of Wedgeport Boats Limited, which has been building fishing vessels since the 1970s outside of Yarmouth.

His company is so fully booked that it’s telling customers it could be two years before they can deliver on new orders. But the orders just keep coming, as Canadian lobster fishermen enjoy strong catches and high prices while getting offers for their used vessels from U.S. fishermen.

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As lobster prices rise, so has the $2-billion industry’s effect on Nova Scotia’s economy. Boosted by sales of the shellfish, the province’s total exports to China have increased dramatically, to $793-million in 2018, from $197-million in 2013. The expansion has put millions into provincial coffers while employing thousands of Nova Scotians.

Those in the industry know the good times won’t last forever. Beyond the unpredictable swings in international trade, climate change and warming ocean waters mean lobsters are slowly migrating north, away from traditional harvesting grounds, Mr. Irvine said. As water temperatures rise, lobsters’ shells thin and the quality of the meat declines.

Catches are already shrinking off the coast of Maine, while harvests in Atlantic Canada peaked in 2016 and have been slowly dropping since. Fishermen up and down the coast are watching that worrying trend closely.

“We can’t sell it if we don’t have it,” Mr. Irvine said. “It’s already happening here, and there’s lots of challenges on the horizon. Anybody who’s listening better be taking it seriously.”

There’s another downside to the boom. While Nova Scotia’s many trade trips to China have helped create a high price for the shellfish, it’s making it harder for some of the province’s restaurants to keep local lobster on the menu, said Megan Bailey, an assistant professor at Dalhousie and the Canada research chair in integrated ocean and coastal governance.

“This may seem good for our economy initially, and certainly it feels good for fish harvesters to get good prices," she said. “But the fishery supports tourism here too, and so if tourist operators cannot source local lobster for their businesses, that will hurt the economy.”

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