By Leonard Polzin
Key Findings
- Both countries have put new tariffs on each other’s dairy. Since August 19, 2026, the United States has charged 50% on Canadian whey products, milk proteins, lactose, casein, and milk powders. Canada’s answer takes effect September 8: 50% on the same kinds of U.S. ingredients and 25% on all U.S. cheese. Neither country tariffed butter, fluid milk and cream, yogurt, or ice cream.
- Canada’s tariffs apply to product inside the import quotas. Since the USMCA took effect, U.S. dairy entering within Canada’s tariff free quotas has paid no tariff. Now it will. The old over quota tariffs of roughly 241% to 298% are unchanged and are not being paid; they stop trade above the quotas.
- U.S. dairy sales to Canada were about $1.3 billion in 2025, 14% of U.S. dairy exports. The tariffed products that can be measured at customs value total about $255 million. Butter, the largest single sale at $228 million, is not tariffed in either direction.
- Filling Canada’s quotas completely would change U.S. milk prices very little. The cheese, butter, and cream quotas already fill; the skim milk powder quota is empty because there is no price difference to earn. Filling every quota would add roughly $30 to $120 million per year of exports, about $0.01 to $0.05/cwt.
- The price effect comes through cheese and whey prices. Each $100 million of lost exports is about $0.04/cwt spread across U.S. milk. The Class III price is calculated from cheese and dry whey prices, the two products Canada tariffed: a $0.01/lb drop in cheese lowers Class III about $0.10/cwt, and in dry whey about $0.06/cwt. Scaling the closest published model to a Canada only action, with the arithmetic shown in the paper, gives an anchor estimate of roughly $0.20 to $0.35/cwt for a sustained action, inside a wider planning range of $0.10 to $0.50/cwt.
- Wisconsin is more exposed than other states. The tariffs land on cheese and on the whey made from cheese. The anchor estimate equals roughly $65 to $113 million per year across Wisconsin farm milk sales, about $51 to $90 per cow; the wider planning range is $32 to $162 million.
- The size of the effect depends on duration and relief. Dairy imported into Canada for re-export is not automatically exempt; relief must be applied for. All figures here are before relief.
What Happened, and in What Order?
The United States acted first. On July 20, 2026, the President signed proclamations under Section 338 of the Tariff Act of 1930, which allows tariffs of up to 50% on goods from a country the President determines is discriminating against U.S. commerce. The dairy proclamation states that Canada discriminates in how it hands out the USMCA cheese quota: Canadian retailers cannot hold USMCA cheese quota but can hold quota for European cheese (The White House, 2026). That is a U.S. determination, not a trade panel ruling; the last USMCA panel on the subject, in November 2023, sided with Canada. The tariffs took effect August 19. Trade talks broke down in late August, and on August 25 Canada announced tariffs on $27.6 billion (Canadian) of U.S. goods to match U.S. tariffs on the same amount of Canadian goods, effective September 8, with goods in transit exempt (Department of Finance Canada, 2026a, 2026b).
The products on each list are shown in Table 1 and in its note; the two lists are close copies. Both put 50% on protein ingredients and powders (milk powders, whey and whey protein, milk protein concentrate, casein) and left butter, fluid milk and cream, yogurt, and ice cream alone. Cheese is the one difference: Canada put 25% on U.S. cheese, while the United States left Canadian cheese alone even though cheese quota administration is the stated reason for the U.S. action. Canada also put 50% on U.S. bakery mixes above 25% butterfat; the United States put 50% on Canadian lactose (Department of Finance Canada, 2026b; Stahl, 2026).
Source : wisc.edu