U.S. President Donald Trump’s many grievances with Canada on trade have begun to give attention to the cross-border dairy market — together with accusations Canada costs triple-digit tariffs on U.S. merchandise.
Trump is ready to impose “reciprocal” tariffs on overseas buying and selling companions beginning April 2 that can match duties charged on American merchandise. He has made clear that will include Canadian dairy, in response to what he says are Canadian tariffs of a minimum of 250 per cent and past.
“Canada is completely one of many worst … when it comes to charging tariffs,” he mentioned within the Oval Workplace final week, particularly pointing to dairy tariffs he mentioned go as excessive as 400 per cent.
The reality is extra difficult.
Canada does cost excessive tariffs on dairy exporters that exceed sure portions set beneath North American free commerce guidelines — an settlement re-negotiated by Trump throughout his first time period — however not as steep as Trump claims.
The federal authorities tells World Information that up to now, no U.S. dairy merchandise imported by Canada have been subjected to these greater tariffs.
“We administer the dairy provide administration system respecting Canada’s worldwide obligations beneath commerce agreements, regardless of the phrases of these agreements could also be,” Philippe Charlebois, a spokesperson for the Canadian Dairy Fee, mentioned in a press release.
Mary Ng, who served as worldwide commerce minister in Justin Trudeau’s authorities, put it extra bluntly final week, telling reporters that Trump’s claims about dairy “are simply not true.”
How does Canada’s dairy system work?
Canada’s provide administration system, which dates again to the Nineteen Seventies, has restricted overseas entry to the Canadian dairy market with the intention to defend home producers and set high quality requirements for merchandise.
When the Canada-United States-Mexico Settlement (CUSMA) was negotiated in 2018 to interchange NAFTA, it gave the U.S. some restricted entry beneath so-called tariff price quotas, which dictate how a lot product American producers can export to Canada per yr earlier than dealing with greater duties.
For instance, Canada locations a tariff of seven.5 per cent on many milk and cream merchandise if they’re “inside entry dedication,” that means the objects don’t exceed the agreed-upon cap.
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If an importer needs to go over that threshold, they face a tariff of between 241 per cent and practically 300 per cent, in keeping with the federal customs tariff schedule.
“Solely as soon as this most amount has been reached for a given yr does Canada impose tariffs above 200 per cent on American dairy merchandise,” Charlebois mentioned.
“Thus far, 100 per cent of U.S. dairy imports to Canada have been made freed from tariff.”
In posts on Fact Social this week, Trump known as out the hefty levies on some farm items, writing Tuesday that, “Canada should instantly drop their Anti-American Farmer Tariff of 250 per cent to 390 per cent on numerous U.S. dairy merchandise, which has lengthy been thought-about outrageous.”
Within the Oval Workplace on Wednesday, Trump mentioned the tariffs “go as much as 400 per cent — you by no means hear of that.”
The claims of a 390 or 400 per cent tariff are false. The steepest meals tariff, which applies to some milk-based fat and oils, tops out at 313.5 per cent for merchandise that exceed the import caps, in keeping with the Canadian tariff schedule.
Imports from the USA are additionally topic to Canada’s 5 per cent items and providers tax, whereas Canadian merchandise face no such premium once they cross into the U.S. However that federal tax is supposed to make sure American objects don’t get pleasure from an edge over these made in Canada, that are likewise topic to GST.
Importers of American items into Canada — primarily based right here or stateside — can get better that GST by registering with the Canada Income Company and submitting company taxes.
Does the U.S. have tariff quotas too?
Charlebois identified in his assertion that beneath CUSMA, “the U.S. makes use of the identical system of tariff-free imports of sure Canadian merchandise as much as a set amount earlier than imposing tariffs.”
The U.S. does have its personal limits for overseas dairy imports from all nations, however set at totally different ranges.
Canada’s most allowable dairy exports to the U.S. are decrease than these for different nations, together with the UK and Australia, in keeping with the U.S. Worldwide Commerce Fee’s harmonized tariff schedule.
American tariff quotas are additionally set on different Canadian imports like sugar.
The Canadian Dairy Fee says the dairy commerce steadiness is “overwhelmingly in favour of the U.S.”
The worth of American dairy exports to Canada since CUSMA got here into impact in 2020 has elevated by virtually 50 per cent, totalling more than US$1 billion last year — practically triple what Canada offered to the U.S. in 2024.
“This elevated U.S. entry got here at a direct price to Canadian dairy farmers, decreasing their market share and weakening the steadiness of Canada’s home dairy sector,” David Wiens, president of Dairy Farmers of Canada, mentioned in a press release final week after Trump first threatened new tariffs on Canadian dairy.
“We name upon our federal and provincial governments to defend our financial system, and safeguard our nationwide meals safety and sovereignty.”
Dairy farmers raised comparable considerations about stability of the Canadian sector throughout CUSMA negotiations. The federal authorities introduced in 2019, after the brand new commerce pact was secured, that it could present $1.75 billion over eight years to dairy producers impacted by the modifications to market entry.
Regardless of the elevated entry, the U.S. has continued to accuse Canada of deliberately “bottlenecking” American dairy exports to provide the Canadian market an unfair benefit, submitting grievances by CUSMA’s dispute decision system and the World Commerce Group.
In 2023, a panel of consultants dominated in Canada’s favour after American dairy farmers argued that its system of low-tariff dairy import permits blocks full entry to the three.5 per cent share of the Canadian market they thought they’d been granted beneath the revised pact.
After that ruling, the U.S. Dairy Export Council mentioned the choice “weakens (CUSMA’s) worth to the U.S. dairy business.”
The commerce pact is up for scheduled evaluation subsequent yr. Trump, on his first day in workplace, launched consultations with American companies and producers on CUSMA’s impacts with studies due again April 1.
U.S. Commerce Secretary Howard Lutnick said in January he needed to see American dairy farmers handled extra pretty in these upcoming commerce talks.
However greater tariffs on dairy merchandise may come earlier than then beneath Trump’s “reciprocal” tariffs. It stays unclear if these tariffs will comply with the circumstances surrounding export caps or quotas, or cowl all merchandise at the same price.
The federal authorities mentioned it’s “troublesome to foretell the total extent of the affect of any proposed U.S. tariffs would have on Canada’s dairy business, because of components just like the fluctuating Canadian greenback and markets, however added it’s prepared to reply if needed.
“The Canadian Dairy Fee is prepared to make sure that the instruments and insurance policies are in place to handle a variety of eventualities,” Charlebois mentioned.
— with information from the Canadian Press
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