As President Donald Trump leaves the G7 today for Singapore – headed for his historic meeting with North Korean leader Kim Jong-un – he had a few boisterous words for the press as he decried the unfair trade relationship between his nation and that led by Canadian Prime Minister Justin Trudeau. As reported by the CBC, President Trump, in particular, called out the heavy tariffs that have been levied for nearly half a century by Canada on dairy products.
“No tariffs, no barriers, that’s the way it should be and no subsidies. In other words, let’s say Canada, where we have tremendous tariffs. The U.S. pays tremendous tariffs on dairy, as an example, 270 per cent… we don’t want to pay anything, why should we pay anything?… It’s very unfair to our farmers. Our farmers, whether it’s through a non-tariff trade barrier or whether it’s through very high tariffs… this is all over the world. You can’t do that. It’s going to stop, or we’ll stop trading…”
Going on to describe the relationship that other nations had enjoyed with previous administrations, and suggesting that American leaders had been too lax in protecting their own interests, President Trump painted the United States as a “piggy bank that everyone’s robbing… the gig is up. They can’t believe they got away with it [for so long]. Canada can’t believe it got away with it.”
The President is not wrong; Canada does impose extremely stiff tariffs on imported dairy products, according to Fraser Institute. Skim milk bears a 202 percent tariff, while butter reaches a staggering 298 percent tariff. Sky-high trade tariffs like this are not a minor deterrent but rather a major detour around international competition entering the domestic market, and it is intentional. The supply management system installed by Canadian politicians in the 1970s enshrine this economic protectionism and quota-based production blueprint as features, not bugs.
It should be remembered, however, that the United States enjoys a healthy dairy trade surplus with Canada despite the rather harsh accusations of the U.S. President. While this is to be expected given the relative size of the two national populations, and given that Canadian dairy industry is both small and sells largely to Canadian consumers, it does shed a bit of light as to the underpinning reasons behind the fiery economic rhetoric.
American dairy farmers are facing a problem, namely a supply glut. There is simply too much dairy for consumers to bear, and thus the remainder must be exported to other nations. With Canada being a very attractive potential market – because of the geographical proximity, purchasing power, and the fact that Canadian consumers are accustomed to much higher retail pricing for milk, cheese, and butter due to price fixing that is part and parcel of the supply management model, as reported by The Globe and Mail – it seems clear that Trump going to bat for his dairy farmers is simply a matter of common sense business.
Canada charges the U.S. a 270% tariff on Dairy Products! They didn’t tell you that, did they? Not fair to our farmers!
— Donald J. Trump (@realDonaldTrump) June 8, 2018
Whether President Trump’s shot across the bow at Prime Minister Trudeau will have any effect on the ongoing negotiations remains to be seen, with Trudeau remaining unflappable in his public response to the question.
“There’s a reason why Donald Trump continues to write tweets on dairy products and Canada — it’s because I’ve told him many times: ‘No, he won’t touch, we won’t touch, our supply management system,'” Trudeau told the press this past Thursday. “We will always defend our supply management system.”