USMCA Drives Growth in U.S. Dairy Exports to Canada

Study Highlights Trade Increase but Ongoing Restrictions Remain

The U.S. and Canada have had long-standing trade disputes over dairy. Under NAFTA, Canada maintained strict import limits to protect its domestic industry. The USMCA renegotiation allowed for slight improvements, granting the U.S. dairy industry access to a small portion of Canada’s market.

U.S. dairy groups have argued that Canada’s management of tariff rate quotas (TRQs) continues to limit trade. In 2022, a USMCA dispute panel ruled against Canada’s restrictions, forcing adjustments. In 2023, Canada won a second dispute, maintaining control over how quotas are distributed.

Tariff Rate Quotas and Trade Limits

The USMCA allows limited U.S. dairy imports at reduced tariffs but applies steep penalties beyond those limits, making imports costly. Butter faces a tariff of nearly 300%, effectively keeping it out of the Canadian market.

Even when quotas are unfilled, administrative rules create additional trade barriers. “We show that quota administration requirements represent additional constraints on trade that are ‘binding’ beyond the volumetric restrictions,” researchers stated.

Looking Ahead in US-Canada Dairy Trade

While U.S. dairy exports to Canada have grown post-USMCA, the industry still faces significant restrictions. The study emphasizes that despite policy changes, many U.S. dairy products remain largely excluded from Canadian markets. Further negotiations may be necessary to achieve fairer trade access in the future.