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U.S. President Donald Trump has recently intensified his focus on trade grievances with Canada, particularly in the dairy sector. He alleges that Canada imposes exorbitant tariffs on U.S. dairy products, claiming figures that reach into the triple digits.
Starting April 2, Trump plans to impose what he terms “reciprocal” tariffs on foreign trading partners, which will align duties imposed on American exports with those levied on their imports. Among these, he has highlighted Canadian dairy tariffs, asserting they reach rates of up to 400 percent.
However, the reality of the situation presents a more nuanced picture. While Canada maintains high tariffs on dairy products exceeding specific quota thresholds established under North American trade agreements—an arrangement that Trump renegotiated during his presidency—these rates are not as steep as claimed by Trump.
The Canadian federal government clarified to Global News that thus far, no U.S. dairy products imported into Canada have faced these higher tariff rates. Philippe Charlebois, spokesperson for the Canadian Dairy Commission, stated, “We administer the dairy supply management system respecting Canada’s international obligations under trade agreements, whatever the terms of those agreements may be.”
Former Trade Minister Mary Ng, who served under Prime Minister Justin Trudeau, bluntly indicated that Trump’s assertions regarding dairy tariffs are fundamentally inaccurate.
Understanding Canada’s Dairy System
The dairy supply management system in Canada, established in the 1970s, is designed to limit foreign access to the domestic market, thus protecting local producers and ensuring product quality.
Under the Canada-United States-Mexico Agreement (CUSMA), negotiated in 2018 to replace NAFTA, the U.S. received restricted access through tariff rate quotas, which dictate how much product American producers can export to Canada each year before incurring higher tariffs. For instance, Canadian tariffs on many milk and cream products are set at 7.5 percent for imports that fall within the established quota.
If an importer exceeds this ceiling, they face elevated tariffs ranging from 241 percent to nearly 300 percent, as outlined in the federal customs tariff schedule. Charlebois noted that these high tariffs are only applied once the defined maximum quantity is surpassed. As of now, he emphasized, “100 percent of U.S. dairy imports to Canada were made free of tariff.”
In recent posts on Truth Social, Trump criticized Canada for its tariffs, referring to them collectively as an “Anti-American Farmer Tariff.” He reiterated his claim of tariffs ranging from 250 percent to 390 percent on various U.S. dairy products, labeling them as deeply problematic.
Despite the dramatic figures Trump has mentioned, the highest actual tariff on certain dairy imports does not exceed 313.5 percent for items over the set quotas. Moreover, U.S. imports into Canada are also subject to a five percent goods and services tax, unlike Canadian goods entering the U.S., which are exempt from this extra cost. However, U.S. importers can recoup that tax through registration with the Canada Revenue Agency and filing corporate tax returns.
Tariff Quotas in the U.S.
Charlebois pointed out that under CUSMA, the U.S. has a similar framework for tariff-free imports of certain Canadian products, up to designated quantities, beyond which tariffs apply. The U.S. imposes its own limits on dairy imports from all nations, though these thresholds are different for Canada compared to other countries such as the UK and Australia.
According to the Canadian Dairy Commission, the balance of dairy trade is heavily skewed in favor of the U.S. Since CUSMA’s implementation in 2020, the value of U.S. dairy exports to Canada has surged by nearly 50 percent, exceeding $1 billion last year, while Canadian sales to the U.S. were significantly lower.
David Wiens, president of Dairy Farmers of Canada, expressed concern last week, stating that increased U.S. market access has come at a direct cost to Canadian dairy farmers, harming their market share and stability. He called for government actions to safeguard Canada’s economic interests and national food security.
These worries were echoed during the negotiations of CUSMA, prompting the Canadian government to allocate $1.75 billion over eight years to assist dairy farmers affected by the new market access conditions.
Despite granting additional access, the U.S. has accused Canada of obstructing American dairy exports to maintain an unfair advantage in the market. Grievances filed through CUSMA’s dispute resolution process and the World Trade Organization have spotlighted these issues. Recently, a panel ruled in favor of Canada, dismissing U.S. claims that Canada’s dairy import restrictions were impeding access to the designated market share under CUSMA.
With the trade agreement set for review next year, Trump has initiated consultations with American agricultural producers regarding CUSMA, with findings due by April 1. U.S. Commerce Secretary Howard Lutnick has expressed a desire for fair treatment for American dairy farmers in any forthcoming negotiations.
As Trump’s reciprocal tariffs loom, it remains uncertain how they will align with the conditions of existing export caps and quotas or if they will apply uniformly to all products. The Canadian government, acknowledging the unpredictable implications such tariffs could pose to its dairy sector, is preparing to adapt as necessary.
Charlebois reassured that the Canadian Dairy Commission is equipped to manage a variety of scenarios in response to potential changes in the trade landscape.
Source
globalnews.ca