Trade tensions between the United States and Canada are heating up again, with President Donald Trump claiming that Canada has been “ripping us off for years” with a 250% tariff on U.S. dairy products. But is this really the case? While the claim has some truth to it, the full picture is more complicated. Here’s what you need to know.
Canada's Dairy Tariffs Explained
Canada does impose high tariffs—sometimes as high as 298.5%—on U.S. dairy products. However, these tariffs do not apply across the board. According to fact-checking site Snopes, these rates only kick in when U.S. dairy exports exceed the quotas set under the United States-Mexico-Canada Agreement, which replaced the North American Free Trade Agreement in 2020.
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Becky Rasdall Vargas, senior vice president of trade and workforce policy at the International Dairy Foods Association, clarified the issue, stating: “It is accurate that Canada imposes a tariff of approximately 250% on U.S. exports of certain dairy products into Canada. However, that tariff would only apply if we were able to reach and exceed the quota on U.S. dairy exports agreed to under the U.S.-Mexico-Canada Agreement.”
So far, these quotas have never been exceeded, meaning that the higher tariff rates have not actually been applied.
Trump's Trade Moves and Canada's Response
Trump has prioritized trade throughout his presidency, and his most recent moves are consistent with that position. In March, he imposed a 25% tariff on imports from Canada and Mexico, though some of these tariffs were delayed until April 2. He also announced an additional 50% tariff on Canadian steel and aluminum.
In response, Canadian Trade Minister Mary Ng called Trump's potential dairy tariffs “completely unjustified” and emphasized that Canada has been working to remove existing U.S. tariffs. She also defended Canada's dairy system, which is structured to protect domestic farmers through a supply-management model. This system limits imports through tariff rate quotas, allowing a certain amount of dairy to enter the country at little to no tariff before higher tariffs take effect.
Trade Wars and Economic Concerns
Trump’s tariff plans have raised fears about the economy more broadly than just dairy. Trade disputes, especially those involving lumber, have long existed between the United States and Canada. American lumber producers argue that Canada's system effectively subsidizes its industry, leading to U.S. duties on Canadian lumber ranging from 11.5% to 17.3%.
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Economists warn that increased tariffs could have unintended consequences. Nobel laureate Paul Krugman criticized Trump's trade strategy, arguing that tariffs could “shrink our economy” by making it less efficient and more costly. He added, “The effect would be to make the economy less efficient and poorer.”
What's Next?
The effects on both economies are still unknown as trade tensions between the U.S. and Canada continue to rise. With a scheduled USMCA review in 2026, dairy tariffs and Canada's supply-management system will likely remain key points of discussion. For now, while Canada does have the ability to impose high tariffs on U.S. dairy, those tariffs have never actually been applied because U.S. exports have never exceeded the agreed-upon quotas.
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