US President Trump tweeted angrily about Canada on April 25, claiming the country was making business difficult for for American dairy farmers.
Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!
— Donald J. Trump (@realDonaldTrump) April 25, 2017
While Trump’s tweet hints at upcoming trade action, the actual policy remains a mystery.
In 2016, Canada implemented a new policy which created a new classification for ultra-filtered milk, which can be used in things like cheese or yogurt.
The price of this class was then lowered to encourage domestic sales and make the product more competitive with US and other milk exporters.
Canada regulates the supply and pricing of its dairy products and provides quotas to manage surpluses and deficits.
On April 12, US Senators Chuck Schumer, Kristen Gillibrand and Tammy Baldwin sent a letter in response to the change detailing what they say is “the negative impact these unfair trade practices are having on America’s dairy industry.”
The senators called on the Trump administration to “immediately address” the issue with the Canadian government, and to investigate if the new policy violates the North American Free Trade Agreement.
The letter claims the pricing policy updates are causing American companies to lose contracts, and claims that the policy changes were designed intentionally to lessen American dairy imports.
US Commerce Secretary Wilbur Ross issued a statement along the same lines on April 24:
It has been a bad week for US-Canada trade relations. Last Monday, it became apparent that Canada intends to effectively cut off the last dairy products being exported from the United States.
Today, in a different matter, the Department of Commerce determined a need to impose countervailing duties of roughly one billion dollars on Canadian softwood lumber exports to us. This is not our idea of a properly functioning Free Trade Agreement.
Commerce Secretary Wilbur Ross
Canada’s dairy sector is exempt from NAFTA so the limits to import duties or tariffs don’t apply.
NAFTA’s rules would only govern dairy trade between the US and Mexico.
“The US has a $400-million dairy surplus with Canada, so it’s not Canada that’s the challenge here,” said Canadian Prime Minister Trudeau said.
The Globe and Mail notes that Canada imported $557 million in dairy products from the US in 2016, while $113 million crossed from Canada into the US.