New 25% tariffs on dairy trade between the U.S. and Canada are shaking the industry. With $856 million in cross-border dairy trade at stake, both countries brace for economic ripples. How will this impact your grocery bill?
Summary:
A new 25% tariff on dairy products crossing the U.S.-Canada border has sent shockwaves through the North American dairy industry. Implemented on February 1, 2025, the tariff affects $856 million in annual cross-border dairy trade. U.S. farmers, who exported $578.29 million in dairy to Canada last year, now face potential market losses, especially in butter sales. Canadian farmers, particularly cheese makers who sent CA$99 million to the U.S., will face higher export costs. Both governments are offering support packages, but farmers on both sides worry about long-term impacts. Consumers in both countries are bracing for higher food prices, with U.S. families potentially facing $1,300 more in annual food costs.
Key Takeaways:
- U.S. Farmers:
- Potential loss of the Canadian market, especially for butter ($118.91m exports in 2024).
- Expected U.S. milk production of 227.2 billion pounds in 2025 may lead to oversupply.
- $85 million in government support available for export initiatives.
- Canadian Farmers:
- 25% tariff on 83,800 metric tons of annual dairy exports to the U.S.
- Cheese exports (CAD 99m in 2024) will be particularly affected.
- CAD 250 million government support package for 2025-2026.
- Potential oversupply in the domestic market may lower farmgate prices.
- Need to focus on domestic market opportunities or explore new international markets.
- Both:
- Expect market volatility and price fluctuations.
- Consider diversifying product lines or exploring value-added products.
- Stay informed about changing trade policies and support programs.
- Monitor production costs closely.
- Explore local and alternative markets to mitigate trade disruptions.
A 25% tax on dairy products crossing the U.S.-Canada border started today. This change affects thousands of dairy farmers who have long sold their products across the border. Canada quickly responded with its own 25% tax on U.S. goods.
Why This Happened
President Trump imposed this tax to address the trade deficit with Canada and protect the interests of American dairy farmers. He says the U.S. is losing money in trade with Canada, especially in dairy products. The tax is also meant to pressure Canada to make a better trade deal when the current one is reviewed in 2026.
“Canada charges the U.S. a 270% tariff on Dairy Products! They didn’t tell you that, did they? Not fair to our farmers!” – Former President Donald Trump, during USMCA negotiations
Impact on Farm Life
The daily operations and income of dairy farmers on both sides of the border are rapidly changing. Canadian processors who used to sell their products to U.S. buyers now face much higher costs on about 83,800 metric tons of annual dairy exports. The new tax significantly impacts Canadian cheese makers, leading to a substantial loss of nearly CA$99 million in exports to the U.S. last year, affecting their profitability.
U.S. farmers are experiencing different changes. Last year, they sold $578.29 million worth of dairy products to Canada, including cheese ($95.35 million), butter ($118.91 million), and fresh milk ($55.61 million). However, the new tax threatens this trade, and many worry about losing Canada as their biggest butter market.
The Canadian government’s $250 million support package for 2025-2026 aims to assist Canadian farmers in adapting to the changes. Despite the $250 million support package, with cheese imports projected to reach 70,000 metric tons in 2025, many farmers worry this won’t sufficiently compensate for their anticipated losses.
| Category | U.S. to Canada | Canada to U.S. |
|---|---|---|
| Total Value | $578.29 million | CA$278 million |
| Top Product | Butter ($118.91m) | Cheese (CA$99m) |
| Volume | N/A | 83,800 metric tons |
| Most Vulnerable Export | Butter (Canada is #1 buyer) | Whey (37,400mt) |
The Flow of Milk Across the Border
The dairy trade between the U.S. and Canada is substantial, with millions of dollars exchanged annually. Last year, U.S. farmers sold $756 million worth of dairy to Canada, mostly cheese, baby formula, and liquid milk. Canadian farmers sent $278 million worth of dairy south, mainly cheese and whey products.
This trade has grown by over 50% in the past decade, indicating a significant expansion in dairy trade between the U.S. and Canada. Now, the new tax will dramatically change this trading.
“In a trade war, there are no winners.” – Canadian Prime Minister Justin Trudeau
What This Means for Everyone
These changes reach beyond the farm. Due to changes in trade policies, U.S. families may face an additional yearly expense of approximately $1,300 for food. In Canada, food prices could increase by 3-5% this year. According to financial analysts, this could result in a $200 billion cost to the U.S. economy over a four-year period, highlighting the substantial consequences of the trade changes.
| Impact Area | U.S. | Canada |
|---|---|---|
| Household Cost Increase | $1,300/year | 3-5% Food Inflation |
| GDP Risk (2025-2028) | $200 Billion Loss | N/A |
| Expected Milk Price Change | +$1.70/cwt (Class III) | -0.0237% Farmgate |
Looking Forward
Changes will continue. New contracts between farmers and milk buyers will start in March 2025, and the enormous trade agreement review will occur in 2026. Both governments are collaborating to develop new strategies and support mechanisms to assist their respective farmers during these challenging times.
Farmers must maintain precise records of their expenses and stay updated on emerging programs that could offer assistance, ensuring they are well-prepared to navigate the evolving trade environment.
Learn more:
- American Dairy Farmers Grapple with Trade War and Immigration Policies: The Fight to Stay Afloat
- US Dairy Farmers’ Revenue and Expenditure Rise Slightly in March
- Global Dairy Trade: Key Insights Every Dairy Farmer Should Know
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