Summarize this content to 2000 words in 6 paragraphs
U.S. President Donald Trump’s many grievances with Canada on trade have begun to focus on the cross-border dairy market — including accusations Canada charges triple-digit tariffs on U.S. products.
Trump is set to impose “reciprocal” tariffs on foreign trading partners starting April 2 that will match duties charged on American products. He has made clear that will include Canadian dairy, in response to what he says are Canadian tariffs of at least 250 per cent and beyond.“Canada is absolutely one of the worst … in terms of charging tariffs,” he said in the Oval Office last week, specifically pointing to dairy tariffs he said go as high as 400 per cent.The truth is more complicated.Canada does charge high tariffs on dairy exporters that exceed certain quantities set under North American free trade rules — an agreement re-negotiated by Trump during his first term — but not as steep as Trump claims. The federal government tells Global News that to date, no U.S. dairy products imported by Canada have been subjected to those higher tariffs.“We administer the dairy supply management system respecting Canada’s international obligations under trade agreements, whatever the terms of those agreements may be,” Philippe Charlebois, a spokesperson for the Canadian Dairy Commission, said in a statement.Mary Ng, who served as international trade minister in Justin Trudeau’s government, put it more bluntly last week, telling reporters that Trump’s claims about dairy “are just not true.”Canada’s supply management system, which dates back to the 1970s, has restricted foreign access to the Canadian dairy market in order to protect domestic producers and set quality standards for products. When the Canada-United States-Mexico Agreement (CUSMA) was negotiated in 2018 to replace NAFTA, it gave the U.S. some limited access under so-called tariff rate quotas, which dictate how much product American producers can export to Canada per year before facing higher duties.For example, Canada places a tariff of 7.5 per cent on many milk and cream products if they are “within access commitment,” meaning the items do not exceed the agreed-upon cap.
Get daily National news
Get the day’s top news, political, economic, and current affairs headlines, delivered to your inbox once a day.
If an importer wants to go over that threshold, they face a tariff of between 241 per cent and nearly 300 per cent, according to the federal customs tariff schedule.
More on Money
More videos
“Only once this maximum quantity has been reached for a given year does Canada impose tariffs above 200 per cent on American dairy products,” Charlebois said.“To date, 100 per cent of U.S. dairy imports to Canada were made free of tariff.”In posts on Truth Social this week, Trump called out the hefty levies on some farm goods, writing Tuesday that, “Canada must immediately drop their Anti-American Farmer Tariff of 250 per cent to 390 per cent on various U.S. dairy products, which has long been considered outrageous.” In the Oval Office on Wednesday, Trump said the tariffs “go up to 400 per cent — you never hear of that.”The claims of a 390 or 400 per cent tariff are false. The steepest food tariff, which applies to some milk-based fats and oils, tops out at 313.5 per cent for products that exceed the import caps, according to the Canadian tariff schedule.Imports from the United States are also subject to Canada’s five per cent goods and services tax, while Canadian products face no such premium when they cross into the U.S. But that federal tax is meant to ensure American items don’t enjoy an edge over those made in Canada, which are likewise subject to GST.Importers of American goods into Canada — based here or stateside — can recover that GST by registering with the Canada Revenue Agency and filing corporate taxes.
Charlebois pointed out in his statement that under CUSMA, “the U.S. uses the same system of tariff-free imports of certain Canadian products up to a set quantity before imposing tariffs.” The U.S. does have its own limits for foreign dairy imports from all countries, but set at different levels.Canada’s maximum allowable dairy exports to the U.S. are lower than those for other countries, including the United Kingdom and Australia, according to the U.S. International Trade Commission’s harmonized tariff schedule.American tariff quotas are also set on other Canadian imports like sugar.The Canadian Dairy Commission says the dairy trade balance is “overwhelmingly in favour of the U.S.”The value of American dairy exports to Canada since CUSMA came into effect in 2020 has increased by almost 50 per cent, totalling more than US$1 billion last year — nearly triple what Canada sold to the U.S. in 2024.“This increased U.S. access came at a direct cost to Canadian dairy farmers, reducing their market share and weakening the stability of Canada’s domestic dairy sector,” David Wiens, president of Dairy Farmers of Canada, said in a statement last week after Trump first threatened new tariffs on Canadian dairy.“We call upon our federal and provincial governments to defend our economy, and safeguard our national food security and sovereignty.”Dairy farmers raised similar concerns about stability of the Canadian sector during CUSMA negotiations. The federal government announced in 2019, after the new trade pact was secured, that it would provide $1.75 billion over eight years to dairy producers impacted by the changes to market access. Despite the increased access, the U.S. has continued to accuse Canada of intentionally “bottlenecking” American dairy exports to give the Canadian market an unfair advantage, filing grievances through CUSMA’s dispute resolution system and the World Trade Organization.In 2023, a panel of experts ruled in Canada’s favour after American dairy farmers argued that its system of low-tariff dairy import permits blocks full access to the 3.5 per cent share of the Canadian market they thought they’d been granted under the revised pact.After that ruling, the U.S. Dairy Export Council said the decision “weakens (CUSMA’s) value to the U.S. dairy industry.”The trade pact is up for scheduled review next year. Trump, on his first day in office, launched consultations with American businesses and producers on CUSMA’s impacts with reports due back April 1. U.S. Commerce Secretary Howard Lutnick said in January he wanted to see American dairy farmers treated more fairly in those upcoming trade talks.But higher tariffs on dairy products could come before then under Trump’s “reciprocal” tariffs. It remains unclear if those tariffs will follow the conditions surrounding export caps or quotas, or cover all products at a similar rate.The federal government said it’s “difficult to predict the full extent of the impact of any proposed U.S. tariffs would have on Canada’s dairy industry, due to factors like the fluctuating Canadian dollar and markets, but added it’s ready to respond if necessary.“The Canadian Dairy Commission is ready to ensure that the tools and policies are in place to manage a range of scenarios,” Charlebois said.— with files from the Canadian Press
