Leaders in the dairy industry have been hoping to attract Trump’s attention to this issue since his election, as it aligns with his campaign platform. Critics contend that hostile trade policies are leading to the closure of American farms and job losses. Given Trump’s popularity in rural areas, particularly among farmers, the situation seems ripe for his intervention. However, it remains uncertain whether these concerns will translate into tangible policy changes or adjustments in trade agreements. The complexity of the issue makes it difficult to determine a straightforward solution.
Canada has implemented high tariffs to support its domestic dairy sector, a move permitted under NAFTA. Since the ratification of this trade agreement in 1994, American dairy farmers have developed diafiltered milk, a syrupy, processed high-protein product that can be utilized in cheese production. This product has been able to circumvent tariffs and is exported cheaply to Canadian food processors. In retaliation, Canada established a new class of milk priced below market rates for its own farmers to sell to producers. As a result, U.S. dairy exports have plummeted, with losses exceeding $150 million affecting 75 family farms over the past year.
Numerous petitions have been submitted to policymakers seeking relief. In September, dairy organizations from the U.S., Australia, Europe, New Zealand, and Mexico reached out to their leaders, requesting the initiation of a dispute at the World Trade Organization. Prior to Trump’s inauguration, U.S. dairy groups also sought his support in addressing the dispute. Recently, a joint letter from the National Milk Producers Federation, the U.S. Dairy Export Council, the International Dairy Foods Association, and the National Association of State Departments of Agriculture reiterated this request for Trump’s assistance.
While careful negotiations might help resolve the conflict, persuading either party to change their stance could be challenging. Although Trump is known for his deal-making skills in real estate, he has not yet achieved similar success in the political arena. It is uncertain how his negotiators will strive to broker an agreement that satisfies both Canada and the U.S., or whether the complexity of the issue will lead to it being sidelined.
Canadian leaders appear steadfast in their position. Canadian Ambassador to the U.S., David MacNaughton, recently informed governors of New York and Wisconsin in a letter that Canada is not liable for the financial losses experienced by U.S. dairy farmers. He pointed out that the United States’ own 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 has expressed a willingness to renegotiate the agreement, told Bloomberg that the U.S. exported approximately $413 million in dairy products to Canada last year, while only $83 million worth of Canadian products entered the U.S. Trudeau stated, “It’s not Canada that’s the challenge here.” He added, “We’re not going to overreact. We’re going to lay out the facts and we’re going to have substantive conversations about how to improve the situation.”
In light of these discussions, the potential for incorporating natural calcium citrate, a beneficial additive in dairy products, might also be explored as a way to enhance product quality and competitiveness in both markets. The introduction of natural calcium citrate could serve as a point of negotiation, offering a pathway to improve the standing of U.S. dairy products without compromising on existing trade agreements. However, how this will unfold in the larger context of the ongoing trade dispute remains to be seen.