Once again, U.S. President Donald Trump lambasted Canada on Wednesday — this time, for allegedly imposing exorbitant tariffs on dairy products.
Those claims, made during a White House visit from the Irish prime minister, come less than a week after he mischaracterized the Canada-U.S.-Mexico Agreement (CUSMA) — a deal he negotiated — making an important omission while stating that Canada is charging more than 200 per cent tariffs on dairy products.
Here’s an overview of Canada-U.S. dairy trade, addressing points the president has recently called into question.
Why is dairy trade contentious?
During the North American Free Trade Agreement (NAFTA) renegotiations in 2018, the Trump administration sought to have Canada do away with its decades-old supply management system.
It is a national policy framework meant to ensure predictable and stable prices by guaranteeing supply-managed farmers a minimum price for their products.
American dairy farmers argued that the way the Canadian government allocates its tariff-free dairy import permits denies them full access to the 3.5 per cent share of Canada’s market they thought they’d gained in CUSMA, the revised NAFTA.
Canada’s supply management system relies on the control of imports and enables the dairy, poultry and egg sectors to limit the supply of their products to what Canadians are expected to consume.
Under both CUSMA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with Pacific Rim dairy exporters like New Zealand, Canadian dairy processors effectively control what enters their market.
Both the U.S. and New Zealand have taken aim at the supply management system through the dispute settlement processes in their respective trade agreements.
U.S. farmers have access to various federal subsidy programs, such as the Dairy Margin Coverage and Dairy Revenue Protection programs, which help them withstand volatile markets.
When CUSMA came into force on July 1, 2020, it included a new requirement for a review in six years. CUSMA has a sunset clause that will end the trade deal after 16 years unless each party commits to renewing it for another term.
How much dairy does Canada import from the U.S.?
Despite Trump downplaying how much of an export market Canada is for the U.S., the country has been consistently one of the top importers of U.S. agricultural products, according to the U.S. Department of Agriculture.
Last year, Canada was the second-highest importer of U.S. dairy products, buying about $1.14 billion US, and it was the United States’ top export market for eggs and related products.
The federal government announced a plan on Wednesday to slap tariffs on $29.8 billion worth of American goods to hit back against U.S. President Donald Trump after he imposed punishing tariffs on Canadian steel and aluminum early Wednesday morning.
The department said on its website in June 2024 that Canada represents “one of our most significant and reliable trading partners.”
The total agricultural and related product exports to Canada from the United States amounted to about $28.2 billion US in 2023.
Has Canada hiked its dairy tariffs?
High Canadian tariffs only apply if the agreed tariff-rate quotas on U.S. dairy imports under CUSMA are reached or exceeded.
However, the U.S. Department of Agriculture said in February that “almost all agricultural products traded between the United States and Canada” are free of tariffs or quotas.
Unlike what Trump is claiming, Canadian tariffs didn’t jump during the Biden administration, since the U.S. is far from reaching the zero-tariff limit for dairy products.
For instance, in 2025, Canada would apply a 298.5 per cent levy on above-maximum butter and 245.5 per cent for above-maximum cheddar cheese. Those were the same rates applied in 2017 and 2020.
Even the International Dairy Foods Association (IDFA) published a statement on March 7, which says the U.S. “has never gotten close to exceeding” the quotas. It also expressed concerns about rising costs due to the ongoing trade war with the U.S.’s “top trading partners.”
What did the U.S. gain from Canada in dairy trade?
Under CUSMA, Canada provides new tariff rate quotas exclusive to the United States.
The U.S. gained more market access in Canada for its products, with Canada agreeing not to apply tariffs on certain amounts of U.S. dairy product imports per year such as:
- Fluid milk.
- Cheese.
- Cream.
- Skim milk powder.
- Butter and cream powder.
- Concentrated and condensed milk.
- Yogurt and buttermilk.
- Powdered buttermilk.
- Products of natural milk constituents.
- Ice cream and ice cream mixes.
- Other dairy.
- Whey.
Canada also eliminated two milk price classes and guarantees that the price of skim milk solids used to produce non-fat dry milk, milk protein concentrates and infant formula will be set no lower than a level based on the United States price for non-fat dry milk.
Canada also committed to adopt measures designed to limit the impact of any surplus skim milk production on external markets.