What’s the Deal with Canadian Dairy Tariffs?
According to Donald Trump, Canada charges tariffs of 240% – 270% on dairy imports to Canada. He says the US is being treated unfairly and has “been screwed by Canada”.
According to the Canadian Dairy Commission, “100 per cent of U.S. dairy imports to Canada were made free of tariff.”
The average tariff amount paid by the US on all goods prior to Trump’s first term was 0.2%
So, what’s going on here?
Canadian Tariffs averaged 0.2% before Trump Negotiated a Better Deal
Supply Management in Canada
The vast majority of all goods sent by the US to Canada are not subject to any tariffs no matter how much the US sends. Check out all the zeros on the Tariff Schedule of Canada. The exception is any goods produced under Supply Management in Canada. These include eggs, dairy and poultry. Supply managed goods are marked with an * on the Tariff Schedule of Canada.
The intent of supply management is to ensure Canada produces these items themselves without a need to import or export. It’s basically a closed system, but the US has been able to make headway into just under 5% of the Canadian dairy market.
Canadian Dairy Production vs the US
In Canada, dairy producers operate as individual family-run businesses. In order to ensure these farmers earn a reasonable living, a milk market board sets minimum prices for dairy products and quotas for each farm to produce. The intent is to produce all the dairy needs of Canada from Canadian producers. Dairy prices are higher in Canada than the US as a result.
In the US, dairy producers are more often large corporate businesses. Employees earn very low wages. Positions are usually filled by immigrants, as American citizens are unwilling to take these jobs. There are no quotas on milk production, so US farms often have too much milk. The state of Wisconsin produces more milk than all of Canada. Excess milk in the US is dumped if it can’t be sold.
The United States-Mexico-Canada Agreement
Donald Trump signed the United States-Mexico-Canada Agreement (USMCA) during his first term. In Canada it’s called CUSMA and in Mexico it’s known as T-MEC. Trump said it was “a terrific deal”. On dairy, Trump scored a win as he was able to convince Canada to increase access to the Canadian dairy market from 3.25% under Obama to 3.69%, even though the Canadian supply management system is designed to be self sufficient.
Canada and Mexico have adhered to the USMCA, but in his second term Trump has changed his mind and now says the US has “been screwed by Canada” on trade. Trump claims that things went wrong during the Biden Administration, but the USMCA was not changed during that time. In fact Biden unilaterally increased tariffs on Canadian lumber and also put a tariff of 100% on Chinese electric vehicles. Biden and Trump both seem to love tariffs.
Why is Trump Going After Canadian Dairy?
Over Access Commitment vs Within Access Commitment
It’s very important to understand the difference between these two terms in the USMCA so that you can understand the misrepresentation that Trump is making. The vast majority of goods sent from the US to Canada have no tariff, because the US has a special status with Canada resulting in Preferential Tariffs of zero. Several items can be subject to tariffs in certain circumstances, because they are Supply Managed in Canada. Dairy, eggs and poultry are supply managed to ensure Canada produces everything it needs of these items in Canada. Supply managed items are subject to tariffs only if the limits set out in the USMCA are exceeded.
The US doesn’t care about eggs and chicken at the moment because they don’t have enough to export. They do care about dairy though, because they have too much. So, that’s where Trump is concentrating. For dairy products, the USMCA allows the US to import dairy into Canada with no tariff up to the Within Access Commitment limit. Once that limit is crossed the US would be charged the Over Access Commitment tariff rate, which is over 200% on most dairy products.
“President Trump just told a pretty big lie.”
US has not been paying any Canadian dairy tariffs
Trump keeps quoting the extremely high Over Access Commitment tariff rates, but the bottom line is that the US has not been sending Canada enough dairy products to cause tariffs to apply. The US is operating at the Within Access Commitment tariff rates of zero. The US has not been paying any tariffs on Canadian dairy.
Clearing Up the Canada Tariff Misinformation
Facts and Figures on Milk
Amount of Milk the US can sell to Canada without a tariff – 91,667,400 pounds
Amount of Milk the US sent to Canada in 2024 – 30,133,206 pounds
Since the US is under the limit, the Over Access Commitment tariff of 241% for milk does not apply. No tariff is payable by the US.
To state that Canada charges a tariff of 241% on milk is a gross misrepresentation. Canada has not been charging any tariffs at all on dairy. Here’s the table showing that all dairy items sent by the US to Canada in 2024 had a Utilization well under the Quota limit. The US could triple the amount of milk sent to Canada and still be under the Quota limit. No tariffs were paid by the US on any dairy products sold to Canada – Zero %.
US Utilization is under the limits for Canadian dairy tariffs.
Inflammatory False Statements
Here are a few of the inflammatory false statements made by Donald Trump:
“The United States pays tremendous tariffs on dairy as an example 270%. Nobody knows that.” Nobody knows that because the truth is that the US hasn’t been sending enough dairy to Canada to cause a tariff to kick in. If the US tripled its milk exports to Canada, they still wouldn’t pay any tariffs. After that the US would indeed start paying a tariff.
“What they’ve done to our dairy farm workers is a disgrace.” The truth is that Canadian dairy producers operate in a closed supply system. The pain that US dairies feel is because they produce too much dairy and Canada doesn’t need or want their excess.
“We don’t need their milk, we gotta lota milk.” Canada feels exactly the same way.
“When I left we had that well taken care of but under Biden they just kept raising it. Very difficult to deal with the Canadian representatives. 250% for dairy products, tariff. You don’t hear that. They have a tremendously high tariff.” Nothing accurate here. The USMCA hasn’t changed since Trump’s first term. The Biden administration won a dispute against Canada on dairy restrictions in January 2022 and Biden increased tariffs on lumber and Chinese electric vehicles during his term. The US hasn’t paid any tariffs on dairy products – Zero %, not 250%.
“They have a tremendous tariff. They make it impossible to sell lumber or dairy products into Canada.” The truth is that there is no tariff for US lumber sold to Canada and the US hasn’t been sending enough dairy to Canada to cause a tariff to kick in there either.
“Canada has been ripping us off for years on tariffs for lumber and for dairy products.” Again, the tariffs paid by the US for lumber and dairy products are both zero.
“We’ve been screwed by Canada” Overall the US only pays on average a tariff of about 0.2% on the total value of all of the products they send to Canada.
Trump Complains about Canada but Dairy Farmers say:
“I think he doesn’t understand the dairy industry either in the States or in Canada.”
Reciprocal Tariffs on Dairy Proposed by Trump
A 250% reciprocal tariff proposed by Trump against Canadian dairy will have no impact on the Canadian dairy industry. The US sends three times as much milk to Canada as vice versa and the math says 250 x 0 = 0.
Why is Trump saying Canadian dairy tariffs are 250% when they are zero?
Trump is a smart person, so there are several possible reasons why his statements about Canadian dairy tariffs are so grossly misrepresented:
Trump is angry that US dairy farms over produce and aren’t profitable, while Canadian farms don’t have these problems.
In making inflammatory statements, he may be hoping Canada will increase the limits for dairy that the US can sell in Canada. That outcome is unlikely though, because it would mean that Canadian dairies would need to reduce their own production so that the US could sell more in Canada instead.
The more likely reason is that Trump wants to convince Americans that they’ve “been screwed by Canada”, so that he gains widespread support for his dream of annexing Canada.
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