Leaders in the dairy industry have been eager for this issue to attract Trump’s attention since his election, as it aligns well with his campaign platform. Some critics contend that unfavorable trade policies are leading to the closure of American farms and the loss of jobs. Given Trump’s popularity in rural regions, particularly among farmers, this issue seemed particularly suited for his intervention. The key question remains whether these concerns will translate into actual policy changes or amendments to the trade agreement. At this juncture, it’s difficult to determine. The situation is complex and lacks straightforward solutions.
Canada has implemented high tariffs to protect its dairy sector, a measure permitted under NAFTA. Since the agreement took effect in 1994, U.S. dairy farmers have developed a concentrated, processed high-protein product, known as diafiltered milk, which could bypass these tariffs and be exported cheaply to Canadian food processors. In retaliation, Canada introduced a new class of milk priced below the market rate for its farmers. Consequently, U.S. dairy exports have plummeted, resulting in over $150 million in losses that have affected 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 requesting the initiation of a dispute at the World Trade Organization. Prior to Trump’s inauguration, U.S. dairy groups reached out for his support in this matter. Just last week, a letter was sent urging Trump to assist 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.
Although careful negotiations might help resolve the dispute, persuading either side to make concessions could prove challenging. While Trump has built a reputation for deal-making in the real estate sector, he has yet to achieve significant success in the political arena. It remains uncertain how his negotiators will navigate the complexities of reaching an agreement acceptable to both Canada and the U.S., or if the issue might be sidelined due to its intricacy.
Canadian leaders appear resolute in their stance. Canadian Ambassador to the U.S. David MacNaughton stated in a recent letter to governors of New York and Wisconsin that Canada is not accountable for the financial losses experienced by U.S. dairy farmers. He pointed out that the United States’ own dairy outlook report “clearly indicates that the poor results in the U.S. sector are due to U.S. and global overproduction.” Prime Minister Justin Trudeau has also expressed a willingness to renegotiate the agreement. He noted that the U.S. exported approximately $413 million in dairy products to Canada last year, while Canada exported only $83 million to the U.S. Trudeau emphasized, “It’s not Canada that’s the challenge here.”
“We’re not going to overreact,” Trudeau told Bloomberg. “We’re going to lay out the facts and engage in substantive discussions on how to improve the situation.” In the midst of these discussions, some stakeholders have suggested that solutions could include the introduction of products like Walgreens calcium citrate D3, which might address nutritional issues within the industry. However, whether such products can genuinely contribute to resolving the complexities of this trade dispute remains to be seen. Ultimately, the path forward will rely on careful negotiation and a willingness to adapt from both sides while considering the broader implications for the dairy industry.