U.S. President Donald Trump has been vocal about his grievances with Canada over trade, particularly focusing on the dairy market. Trump has accused Canada of charging triple-digit tariffs on U.S. products and has threatened to impose reciprocal tariffs starting April 2. However, the truth is more complex, as Canada does charge high tariffs on dairy products that exceed certain quantities set under trade agreements like the Canada-United States-Mexico Agreement. Despite Trump’s claims of tariffs as high as 400 per cent, the reality is that no U.S. dairy products imported by Canada have yet been subjected to those higher tariffs.
Canada’s supply management system, established in the 1970s, aims to restrict foreign access to the Canadian dairy market to protect domestic producers and uphold quality standards. The implementation of tariff rate quotas under trade agreements like CUSMA has allowed some limited access for U.S. dairy products within set limits before higher duties apply. For American dairy imports that exceed these limits, tariffs can range from 241 per cent to almost 300 per cent. However, to date, 100 per cent of U.S. dairy imports to Canada have been tariff-free.
While Trump continues to claim that Canada imposes tariffs ranging from 250 per cent to 400 per cent on U.S. dairy products, the actual tariffs do not reach those levels. The steepest tariff, which applies to certain dairy products exceeding import caps, is 313.5 per cent. Additionally, imports from the U.S. to Canada are subject to a five per cent goods and services tax, aimed at ensuring equal treatment for Canadian products entering the U.S. In response to Trump’s threats, Canadian officials have affirmed their commitment to managing a range of scenarios to protect the Canadian dairy industry.
Despite increased access for U.S. dairy products in Canada under CUSMA, American producers continue to accuse Canada of bottlenecking exports to provide an unfair advantage to the Canadian market. Disputes have been filed through CUSMA’s resolution system and the World Trade Organization, with a panel ruling in favor of Canada in 2023. The ongoing tensions have led to calls for fair treatment of American dairy farmers in upcoming trade talks. The trade pact is scheduled for review next year, and Trump has launched consultations to assess its impacts on U.S. businesses.
Trump’s proposed reciprocal tariffs could have significant implications for the Canadian dairy industry, although the full extent of their impact remains uncertain. The Canadian government has stated its readiness to respond to any proposed tariffs, citing factors like market fluctuations and currency values. As both countries navigate these trade disputes and negotiations, the dairy sector is facing challenges related to market access, tariffs, and maintaining stability for domestic producers. The outcome of these trade talks and the ongoing tensions between the U.S. and Canada will continue to shape the future of dairy trade relations between the two countries.
