U.S. dairy products entering Canada within our tariff-rate quotas could soon become significantly more expensive. Mark Carney’s government has announced a new round of countermeasures covering C$27.6 billion in U.S. imports, in response to tariffs imposed by Washington on Canadian goods.
Starting September 8, Ottawa will impose tariffs of 15%, 25% or 50% on a long list of U.S. products. Dairy products are directly targeted, along with farm machinery and equipment, steel, appliances, pulp and paper products, and electronics.
Imports within tariff-rate quotas are also targeted
This is probably the most interesting detail for Canadian dairy farmers. The Department of Finance list does not target only imports above tariff-rate quota levels. Several tariff lines explicitly state that products imported within the access commitment will also face the new duties.
Those quotas are at the heart of the market access granted to U.S. dairy products under CUSMA. I have already shown, using the trade data, that the United States already sells far more dairy products to Canada than Canada sells in return and that several quotas are not even fully used.
For example, certain milk and cream powders containing no more than 1.5% milk fat will face an additional 50% tariff whether they enter within or above the access commitment. Several cheeses, including cheddar and other cheese categories, will face tariffs of 25%.
In other words, Ottawa is not only targeting imports that already faced the high over-quota tariffs associated with supply management. It is also making part of the U.S. access to the Canadian market within those quotas more expensive.
A possible effect on Canadian production
If these tariffs make some U.S. dairy products less competitive in Canada, importers may reduce purchases from the United States. The missing volume would then have to be replaced elsewhere, including with more Canadian production where the product can be supplied domestically.
For producers, this is therefore something worth watching closely. A real decline in imports could eventually translate into higher demand for Canadian milk and, depending on the scale of the shift, more incentive days or higher production requirements.
Still, it would be a mistake to jump to conclusions too quickly. Tariff-rate quotas are not automatically filled to 100%, processors can change their sourcing, and the effect will vary by product. A tariff on imported cheese does not have exactly the same effect on Canadian milk demand as a tariff on milk powder.
Farm equipment is also in the crosshairs
Canada’s response does not only affect what farms produce. It also affects some of what farms buy. U.S.-made farm machinery and equipment are among the imports targeted by the counter-tariffs.
For producers who need to replace a machine, buy a major part or invest in new equipment, these duties could have the opposite effect from those applied to dairy. Instead of protecting a Canadian market, they could raise the cost of a farm investment when the product comes from the United States.
This is another part of the story that will need close attention in the coming months. A trade war can give with one hand and take with the other: lower U.S. dairy imports could support demand for Canadian milk while tariffs on machinery and equipment raise some production costs.
A measure that may be temporary
This is also the main reason for caution. These counter-tariffs are part of a trade conflict, not a permanent reform of Canadian dairy policy. Ottawa presents them as a direct response to U.S. tariffs and says its retaliation is meant to match the American measures.
If the United States removes its own tariffs as part of a future agreement, Canada’s countermeasures could disappear as well. It would therefore be unwise for a farm to make long-term investment or expansion decisions today on the assumption that this added market protection will last for years.
My view: this is an interesting development for dairy farmers. If some of the U.S. milk and dairy products currently entering Canada within our quotas become less competitive, Canadian production will probably have to increase to replace part of what no longer comes in. But I am not convinced this measure will be in place for very long. Before drawing conclusions about future production, we will need to watch actual import volumes very closely and, above all, follow how negotiations with the United States evolve. We will also need to watch the other side of the equation: if counter-tariffs make some U.S. farm equipment more expensive, part of the potential gain could show up in higher investment costs.
An interesting political precedent
For years, much of the trade debate around supply management has focused on the market access Canada must grant its trading partners within tariff-rate quotas. This time, the Canadian government is using that very access as leverage in its trade response.
That is what makes this measure more interesting than just another round of tariffs between Ottawa and Washington. For once, the question is not only whether the United States will gain more access to the Canadian market. In the short term, Canada has instead made part of the existing U.S. access more expensive.
The new duties are scheduled to take effect at 12:01 a.m. on September 8, 2026. From that point on, the most important number will be simple: do the targeted U.S. imports actually decline? If they do, that is when the impact on Canadian producers will start to become tangible.
Sources: Department of Finance Canada, announcement of the countermeasures and official list of targeted products.
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