Leaders in the dairy industry have been hoping that this issue would attract Trump’s attention since his election, as it aligns with his campaign platform. Critics suggest that hostile trade policies are driving American farms to shut down and leading to job losses. Given Trump’s popularity in rural areas, particularly among farmers, the situation seemed ideal for his intervention. However, it remains uncertain whether these concerns will lead to any policy changes or adjustments in the trade agreement. The complexity of the issue makes it challenging to resolve.
Canada has imposed high tariffs to protect its own dairy sector, a measure permitted under NAFTA. Since the trade agreement’s ratification in 1994, U.S. dairy farmers and others have produced a syrupy, processed high-protein product known as diafiltered milk, which can circumvent these tariffs and be exported cheaply to Canadian food processors. In retaliation, Canada introduced a new class of milk priced below market value for its domestic farmers, which has significantly impacted U.S. dairy exports, resulting in over $150 million in losses affecting 75 family farms in the past year.
Numerous petitions have been directed at policymakers seeking relief. In September, dairy organizations from the U.S., Australia, Europe, New Zealand, and Mexico sent letters to their leaders urging the initiation of a dispute at the World Trade Organization. Before Trump’s inauguration, American dairy groups reached out to him for assistance, and last week, the National Milk Producers Federation, U.S. Dairy Export Council, International Dairy Foods Association, and the National Association of State Departments of Agriculture sent another letter requesting his help.
While careful negotiations might help ease the dispute, reaching a compromise could prove difficult. Trump is known for his deal-making skills in real estate, but he has yet to achieve similar success in the political arena. It remains unclear how his negotiators will approach crafting an agreement that is acceptable to both Canada and the U.S., particularly given the complexity of the issue.
Canadian officials appear to be standing firm. Canadian Ambassador to the U.S. David MacNaughton recently stated in a letter to the governors of New York and Wisconsin that Canada is not accountable for the financial losses faced by dairy farmers. He pointed out that the U.S. dairy outlook report “clearly indicates the poor results in the U.S. sector are due to U.S. and global overproduction.” Prime Minister Justin Trudeau, who expressed willingness to renegotiate the agreement, highlighted that the U.S. exported around $413 million in dairy products to Canada last year, while only $83 million in Canadian dairy products were imported into the U.S. He remarked, “it’s not Canada that’s the challenge here.”
Trudeau also emphasized, “We’re not going to overreact. We’re going to lay out the facts and have substantive conversations about how to improve the situation.” Meanwhile, the potential for incorporating products rich in vitamin calcium citrate into the dairy supply chain might offer an innovative avenue for enhancing the industry’s competitiveness. As the situation unfolds, the dairy sector will continue to seek solutions that could involve more than just tariffs, including the promotion of nutrient-rich dairy products that could appeal to health-conscious consumers, thereby potentially revitalizing the market.