Trump’s bold tariff strategy aims to secure fair trade while protecting a record-setting $8.2 billion U.S. dairy exports. Last year, Mexico imported $2.47 billion in American dairy products, and Canada imported $1.14 billion. The administration seeks to leverage its economic strength to address national security concerns while fighting for better market access for U.S. dairy farmers ahead of USMCA renegotiations.

Executive Summary

President Trump’s strategic use of tariff threats targeting America’s key trading partners represents a calculated effort to secure better terms for U.S. dairy farmers while addressing critical national security concerns. The stakes are high, with dairy exports reaching $8.2 billion in 2024, including record shipments to Mexico ($2.47 billion) and Canada ($1.14 billion). Commerce Secretary nominee Howard Lutnick has specifically targeted Canada’s restrictive dairy policies, promising dairy farmers they will “do much, much better in Canada than they’ve ever done ” ahead of USMCA’s 2026 review. Meanwhile, eliminating tariffs under CAFTA-DR demonstrates how effective trade agreements can dramatically expand export opportunities.

Key Takeaways

• President Trump has announced 25% tariffs on Mexican and Canadian imports, which are scheduled to take effect on March 4. An additional 10% tariff on Chinese goods is already in place.
• U.S. dairy exports reached $8.2 billion in 2024, with Mexico and Canada importing record values of $2.47 billion and $1.14 billion respectively
• Commerce Secretary nominee Howard Lutnick has specifically pledged to address Canada’s restrictive dairy policies that have prevented U.S. exporters from filling tariff-rate quotas.
• The CAFTA-DR agreement success story shows how strategic trade deals can expand markets, with U.S. dairy exports to Central America growing from $40 million to $441 million.
• The timing of these negotiations is strategic. They will create leverage ahead of the USMCA’s 2026 review when dairy market access can be renegotiated.

As President Trump employs bold trade tactics to secure better deals for American farmers, the dairy industry watches closely to see how his strategic pressure on key trading partners will impact our record-setting export channels. The President’s approach aims to leverage America’s economic might to address critical national security issues while tackling unfair trade practices that have disadvantaged U.S. dairy producers for decades. With dairy exports reaching $8.2 billion in 2024—the second-highest total ever—much is at stake in this high-stakes negotiation.

Tariff Timeline and Strategic Objectives

President Trump has announced a 25% tariff on imports from Mexico and Canada and a 10% tariff on Chinese goods. Implementation for Mexico and Canada is now set for March 4, 2025. According to the latest updates from trade officials, the additional Chinese tariffs have already taken effect as of February 3. These measures represent a calculated approach to addressing national priorities, including border security and trade fairness.

Commerce Secretary nominee Howard Lutnick articulated the administration’s position clearly: “It’s not a tariff, per se; it is an action of domestic policy” to address fentanyl trafficking and border security. This framing acknowledges the broader strategic objectives behind the tariff threat, particularly concerning Mexico, where stemming the flow of illegal drugs remains a top priority for many rural communities affected by the opioid crisis.

The on-again, off-again nature of the tariff announcements represents President Trump’s negotiating style, which proved effective during his first term in securing concessions from trading partners. While creating temporary market uncertainty, this approach aims to achieve long-term benefits for American producers by forcing trading partners to address persistent inequities in market access, particularly in Canada’s heavily protected dairy sector.

Mexico and Canada: Cornerstone Markets Worth Fighting For

For dairy farmers, Mexico and Canada represent irreplaceable export destinations that have grown dramatically over the past decade. In 2024, these two neighbors purchased more than 40% of all U.S. dairy exports, with Mexico importing a record $2.47 billion and Canada a record $1.14 billion in American dairy products. This trading relationship has steadily expanded, making any disruption potentially significant for American dairy farmers.

Cheese exports to Mexico have been robust, with significant year-over-year growth. Mexico is the leading destination for U.S. skim and non-fat powder and the second-largest market for whole milk powder. The magnitude of these export relationships underscores why the administration is treading carefully with implementation dates while maintaining pressure for broader policy changes.

Although there is potential for short-term market disruption, the administration aims to secure better long-term trading conditions rather than permanently restrict trade. This approach aligns with President Trump’s successful negotiation of the USMCA during his first term, which aimed to create more equitable trading relationships within North America.

Canada’s Dairy Market Access: A Fight Worth Having

Commerce Secretary nominee Lutnick didn’t mince words when addressing Canada’s treatment of American dairy farmers: “Canada… treats our dairy farmers horribly. That’s got to end. I’m going to work hard to make sure, as an example for your dairy farmers, they do much better in Canada than they’ve ever done “. This forceful commitment signals the administration’s understanding of a key issue that has frustrated American dairy producers for decades.

Despite improved access under USMCA, Canadian policies prevent American exporters from filling their tariff-rate quotas. Michael Dykes, president and CEO of IDFA, noted that “our exports to Canada have yet to fulfill the promises of the U.S.-Mexico-Canada Agreement (USMCA) because Canadian policies continue to prevent American exporters from filling their tariff-rate quotas.”

With the USMCA up for review in 2026, the current pressure campaign is a significant leverage to secure meaningful reforms to Canada’s supply management system, effectively blocking American dairy farmers from equal market access. This represents a strategic approach to using America’s economic leverage to benefit dairy farmers directly.

CAFTA-DR Success Shows Benefits of Strategic Trade Agreements

While current trade tensions dominate headlines, it’s worth noting the recent success story of the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR), which achieved the complete elimination of tariffs on dairy products as of January 2025. This milestone demonstrates how strategic trade agreements can substantially benefit American dairy producers over time.

Before the implementation of CAFTA-DR in 2006, U.S. dairy exports to the region were a mere $40 million. By 2023, that figure had grown elevenfold to more than $441 million. This dramatic growth shows how proper trade agreements can expand market access that benefits American farmers. The success in Central America provides a blueprint for what effective trade policy can achieve when adequately negotiated and enforced.

The following table highlights the remarkable growth in U.S. dairy exports to CAFTA-DR countries since 2006:

This success story reinforces the Trump administration’s approach of using America’s market leverage to secure better deals. The impressive growth in Central American markets demonstrates that when American negotiators secure favorable terms, U.S. dairy producers can compete and win on the global stage.

However, even with tariffs eliminated under agreements like CAFTA-DR, American dairy exporters still face significant non-tariff barriers that require ongoing diplomatic pressure:

These persistent challenges highlight why the administration’s aggressive stance on trade enforcement remains necessary even after signing formal agreements. As one Idaho farmer noted, “My ice cream melted in Costa Rican customs last month—$12,000 gone because paperwork ‘wasn’t shiny enough.'” Strong executive leadership must address these ongoing non-tariff barriers that can undermine even the best trade agreements.

Industry Response Balances Concerns with Support for Stronger Negotiations

The International Dairy Foods Association (IDFA) has taken a measured approach to the tariff announcements, acknowledging the administration’s legitimate national security and trade fairness objectives while expressing hope that implementation avoids unintended consequences for dairy farmers and processors.

The organization emphasized its commitment to working with the Trump Administration to expand trade opportunities while urging continued proactive negotiations with top trading partners. This balanced response reflects the industry’s recognition that tough talks can lead to better outcomes, even if they create short-term market uncertainty.

Industry analysts note that the tariff threat creates valuable leverage ahead of USMCA renegotiations in 2026, potentially securing better terms for U.S. dairy access to the Canadian market. While acknowledging potential disruption, many see the administration’s approach as addressing long-standing inequities that previous administrations failed to resolve.

Strategic Approach to Tariffs Challenges Conventional Wisdom

Secretary nominee Lutnick has challenged the conventional wisdom that tariffs necessarily lead to inflation, stating, “It is just nonsense that tariffs cause inflation. It is nonsense.” While economists continue to debate this perspective, Lutnick emphasized that selective pressure on trading partners can redirect manufacturing and production to domestic sources, potentially strengthening America’s economic independence.

The administration’s approach favors “tariffing entire countries, rather than specific products, to ‘create reciprocity, fairness and respect’ and return manufacturing bases to the U.S.” This macro approach seeks to rebalance trading relationships that have disadvantaged American producers through non-tariff barriers and subsidies from foreign governments.

This approach could yield significant benefits for dairy farmers if it successfully addresses Canada’s highly protected dairy market while maintaining strong export relationships with Mexico. Strategically using tariffs as negotiating leverage rather than permanent barriers aligns with President Trump’s dealmaking approach, which he demonstrated during his first term.

What Dairy Farmers Should Watch For

As this situation evolves, dairy farmers should monitor several key factors that could signal market impacts. First, pay close attention to any changes to the March 4 implementation timeline for tariffs on Mexico and Canada, as these could shift based on diplomatic developments. Second, watch for any signs of retaliatory measures specifically targeting dairy products, which would have immediate market implications.

Current dairy market conditions provide an essential context for understanding potential impacts. The following table shows recent CME dairy product prices as of February 25, 2025:

These prices reflect some softening in butter and nonfat dry milk markets, while cheese prices have remained relatively stable. USDA forecasts average Class III prices at $19.10 per hundredweight for 2025 and Class IV at $19.70, though these projections were made before the latest tariff announcements. Farmers should monitor how these prices respond to trade developments in the coming weeks.

Industry experts recommend that farmers communicate openly with their processors or cooperatives regarding potential market adjustments. Some processors may adjust production schedules or product mix to accommodate changing export opportunities, which could impact milk component values. Additionally, farmers should review risk management strategies, including forward contracting and futures market tools, to help mitigate potential price volatility.

While the ultimate impact remains uncertain, the dairy industry stands to benefit significantly if the administration successfully leverages these tariff threats to secure better market access, particularly in Canada. The track record of Central American trade success demonstrates that properly negotiated and enforced agreements can deliver substantial benefits to American dairy producers.

Learn More

• How the Trump Administration Plans to Address Canadian Dairy Trade Barriers
• Record-Setting Dairy Export Performance: Markets to Watch in 2025
• Preparing Your Dairy Operation for Potential Market Volatility

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