What the U.S. dairy industry really wants from Canada

Yahoo

5 hours ago

U.S. dairy producers insist they're not looking for Canada to dismantle its supply management system, but they do want Canada to follow the letter and spirit of the existing deal that governs the dairy trade between the two countries.
U.S. President Donald Trump has repeatedly blasted Canada as "unfair" and "ripping us off" with massive dairy tariffs, in a way that isn't fully accurate.
However, senior figures in the U.S. dairy industry are concerned there's also some misrepresentation happening north of the border, creating a false perception of what U.S. producers are actually seeking in terms of access to the Canadian market.
Shawna Morris, executive vice-president for trade policy and global affairs with the National Milk Producers Federation and the U.S. Dairy Export Council, says it's not true that her industry wants Canada to abandon its system for protecting the dairy sector.
"We've never been out to eliminate Canada's supply management," said Morris in an interview from her office in Arlington, Va., just outside Washington.
"It's much easier to create a boogeyman and fear-mongering around that being the goal of the Americans, but that's certainly not what our industry has advocated."
Becky Rasdall Vargas, senior vice-president of trade and workforce policy at the International Dairy Foods Association lobby group, says she recognizes the Trump administration has been "fairly abrasive" in its tone toward Canada.
"But at the same time, I think we feel pretty ignored by Canada in terms of our legitimate trade concerns."
Two main trade irritants
According to Morris and Rasdall Vargas, the U.S. industry has two main irritants with Canada: how the Canadian government allocates the existing quotas for tariff-free imports of dairy products, and how Canadian milk producers dump cheap milk protein into the international market.
The import quotas negotiated under the Canada-U.S.-Mexico Agreement (CUSMA, which Americans call USMCA) are designed to give U.S. producers tariff-free access worth roughly 3.5 per cent of Canada's domestic demand for dairy products.
"Three per cent is pretty limited," said Morris. "It's certainly not a situation where our industry is gonna come in and take over the Canadian dairy market."
CUSMA sets import quotas for 14 categories of dairy products. That allows an annual volume of each category to enter Canada tariff-free, and any imports exceeding the quota would get hit with sky-high tariffs of 200 per cent or more.
Canada's rationale for this is ensuring the domestic dairy industry thrives by effectively capping how much the U.S. can export each year, preventing cheaper American products from dominating the market. The U.S. government supports its dairy sector with hefty direct subsidies.
The U.S. dairy industry says it's not asking for Canada's quotas to be increased or the tariff rates to be decreased. Rather, it wants changes to how Ottawa allocates the quotas: more specifically, who gets them.
Big Canadian dairies dominate import quotas
Much of the quota volume is allocated to major Canadian-owned dairy processing companies such as Saputo and Agropur. Industry analysts on both sides of the border say such companies have little incentive to import U.S. products that would compete with their own.
According to the U.S. producers, this restricts their access to the Canadian market.
Their evidence for that claim: Canadian trade statistics showing tariff-free imports from the U.S. have almost never reached the quota limits in any category.
WATCH | What Donald Trump gets wrong (and right) about Canada's dairy tariffs:
"For five years, Canada's been playing games with these tariff rate quotas," said Morris. "That's a lot of volume that should have been able to reach Canadian consumers."
Despite those complaints, Canada's imports of U.S. dairy products have risen significantly since the CUSMA quotas took effect in 2020. Those imports totalled $897 million in 2024, according to Statistics Canada data, more than four times the value of imports in any year before 2020.
"Trade certainly should be far higher than it is," said Morris. "That was what USMCA promised to deliver and quite frankly has fallen far short."
A key change the U.S. producers would like to see is for Canada to grant retailers and the food-service sector a share of the tariff-free quotas, allowing them to import some U.S. dairy products directly.
The U.S. industry also wants Canada to be far stricter in taking away allocations from importers that fail to use their full quota in a given year.
While a bill that Parliament passed in June bars Ottawa from agreeing to raise the dairy import quotas or lower the tariffs, it doesn't prevent other changes to the system, leaving Canadian trade negotiators some wiggle room.
WATCH | Canada's supply management system, explained:
'An inherent mismatch'
The other chief complaint from the U.S. focuses on Canada's cheap exports of milk proteins, also described as milk solids, such as skim milk powder.
The Americans argue that because Canada's supply management system keeps domestic prices artificially high, Canada can sell its excess production of milk proteins internationally at artificially low prices, undercutting the competition.
"It frankly makes no sense that you could have one of the highest milk prices in the world and yet be exporting dairy protein at some of the lowest prices globally," said Morris. "That's just an inherent mismatch."
Canada's pricing of milk solids for the export market is currently the subject of a U.S. International Trade Commission investigation, ordered by the Trump administration, with a hearing scheduled for Monday.
Dairy Farmers of Canada declined a request for comment on the case. "During the recent election, all major parties expressed support for supply management and stated that it would be off the table in upcoming trade negotiations," the organization said in a news release in June.
The Trump administration is not the first to accuse Canada of breaching CUSMA terms on dairy.
Joe Biden's administration twice took legal action over Canada's handling of the dairy quotas, claiming it was unfairly undermining U.S. access to the Canadian market.
The U.S. won the first dispute, which it launched in 2021, but failed to win the second, in 2023.
Now in 2025, Rasdall Vargas says her industry wants Canada to be willing to hear its true concerns and do something about them.
"Ultimately, when we have a trading partner who isn't taking our concerns seriously until they're threatened to do so, it's also not a good feeling from our side," she said.
Whatever anyone thinks about Trump's bluster on Canadian dairy, Rasdall Vargas believes it's having an impact.
"I think that's the president's way of having our back, probably more abrasively than Canada would like," she said.
"I will say I've never seen Canadian dairy interests take U.S. concerns about Canadian dairy policy more seriously than in the past six months."