Canada's dairy tariffs have sparked renewed attention and debate, primarily due to their significant impact on trade relations with the United States. The tariffs, which exceed 200% on certain dairy imports from the US, remain a contentious point despite the implementation of the United States-Mexico-Canada Agreement (USMCA). While the USMCA aimed to ease some trade restrictions, it retained the zero-tariff, zero-quota trade for specific amounts of US imports in 14 dairy categories each year.
Under the USMCA, Canada assured that it would not impose tariffs on a set volume of US dairy imports annually. However, the US has not reached even half of these zero-tariff maximums in various dairy categories, including milk. This discrepancy has raised concerns about Canada's administrative practices that may be obstructing the market access promised to the US under the agreement.
The US-Canada Dairy Trade Dynamics
The ongoing trade challenges between the US and Canada stem from complex dairy market structures shared by both nations. The US operates a similar system for its dairy market, which often leads to misunderstandings about trade imbalances. Despite these similarities, Canada remains a vital export destination for US agricultural products, ranking as the world's second-largest market.
In 2024, Canada purchased approximately $28.4 billion worth of US agricultural products, including $1.1 billion in dairy products. This figure marks a significant increase from about $625.5 million in 2015, highlighting steady growth over the past decade. However, the tariffs that former President Donald Trump criticized during his tenure remain intact under the USMCA.
"In practice, these tariffs are not actually paid by anyone." – Al Mussell
Al Mussell's statement underscores a critical point in the tariff debate. While the tariffs exist on paper, their practical application is often questioned, complicating the narrative around their real-world impact.
The Role of Tariffs in Trade Agreements
The US-Canada dairy trade relationship also reflects broader themes seen in international trade agreements. Under the previous North American Free Trade Agreement (NAFTA), nearly all US agricultural exports to Canada faced no tariffs or quotas, setting a precedent for reduced trade barriers. However, the transition to the USMCA did not result in lowered tariffs for imports above quota thresholds.
This reality suggests that while trade agreements like the USMCA aim to facilitate smoother exchanges between countries, they often preserve existing protections for certain industries. The retention of high tariffs underscores the challenge of balancing domestic industry safeguarding with international trade commitments.
President Trump's characterization of the USMCA as "the best trade deal ever made" highlights differing perspectives on its effectiveness. While the agreement brought certain benefits, it left key tariff structures unchanged, affecting perceptions of its overall success.
"the best trade deal ever made" – President Donald Trump
Administrative Barriers and Market Access
A significant issue in US-Canada dairy trade involves Canada's use of administrative tactics that may hinder US market access. Although Canada committed to maintaining zero-tariff conditions for specified dairy import levels, administrative measures have reportedly restricted this access.
The situation is further complicated by the underutilization of zero-tariff allowances by the US. Despite having room to expand exports under the agreed quotas, the US is not reaching its maximum potential in any dairy category. This underuse suggests that factors beyond tariffs may influence trade dynamics, such as logistical challenges or market demand fluctuations.
The interplay between administrative barriers and actual market access continues to shape discussions about fair trade practices and compliance with international agreements. As both nations navigate these complexities, stakeholders call for clearer strategies to ensure that agreements like the USMCA deliver their intended benefits.
