Justin Trudeau and Melania Trump greeting each other at the 2019 G7 Summit… Is this what they call “C***old”?
Trump threatens new tariffs on Canada, including 250% tax on dairy
Trump Announces New 250% Tariff on Canada Starting Almost Immediately
A day after offering CanadaĀ a one-month reprieveĀ on punishing, virtually across-the-board 25% tariffs, President Donald Trump has threatened new tariffs as soon as Friday on Canadian lumber and dairy products. Itās yet another twist in a serpentine trade policy that seems to shift on an hourly basis.
āCanada has been ripping us off for years on lumber and on dairy products,ā Trump said in an Oval Office address Friday, citing Canadaās roughly 250% tariff on US dairy exports to the country. Trump said America would match those tariffs dollar-for-dollar.
āWe may do it as early as today, or weāll wait until Monday or Tuesday,ā Trump said. āWeāre going to charge the same thing. Itās not fair. It never has been fair, and theyāve treated our farmers badly.ā
A dairy spat years in the making
Canada charges exorbitant tariffs on certain dairy products, including a tariff on milk that can be as high as 241%, much to the consternation of Americaās dairy farmers, who have complained for years that the border nation is treating them unfairly.
In 2023, a trade dispute panel ruled in favor of Canada, arguing that the high import taxes did not violate the USMCA. Wisconsin Democratic Senator Tammy Baldwin lambasted the decision, arguing it was creating an undue burden on her stateās dairy industry.
āWisconsin dairy farmers work hard every day to bring world class products to market, and they deserve a level playing field with their global competitors,ā BaldwinĀ said in the wake of the November 2023 decision. āThis decision flies in the face of the agreement our country made with Canada and puts our Made in Wisconsin dairy products at a disadvantage.ā
But Trump, who frequently complained about high dairy tariffs in his first term in office, did not negotiate more reasonable tariffs into the USMCA treaty, which he signed.
Despite the grievances and the alarmingly high number, Canadian dairy is not a significant export, and a reciprocal 241% tariff on milk is unlikely to do significant economic damage to either country.
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New York Fries, founded in Brantford, Ontario.
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(see “Product of U.S.A.?)
That said, we consult CanuckAI…
What will happen now that Trump threatens new tariffs including 250% tax on Canadian dairy products?
If Trump imposes new tariffs, including a 250% tax on Canadian dairy products, several outcomes are likely:
- Trade Tensions Escalate: Canada may retaliate with tariffs on U.S. goods, escalating trade tensions between the two nations.
- Economic Impact: Canadian dairy exports to the U.S. would drop significantly, hurting Canadian farmers. U.S. consumers might face higher prices for dairy products due to reduced supply.
- WTO Involvement: Canada could challenge the tariffs at the World Trade Organization (WTO), potentially leading to a lengthy legal dispute.
- Supply Chain Disruptions: U.S. businesses relying on Canadian dairy imports may face shortages or higher costs, disrupting supply chains.
- Political Strain: The move could strain diplomatic relations, complicating cooperation on other issues like defense or environmental policies.
- Market Uncertainty: Investors and businesses in both countries may face uncertainty, potentially affecting stock markets and economic growth.
Overall, such tariffs would likely harm both economies and worsen bilateral relations.
Which Canadian Cities Are Most Exposed to Trumpās Tariffs?
That index found that, of Canada’s 41 biggest cities, the three most vulnerable to U.S. tariffs set to go in effect on March 12th are Saint John, Calgary and Windsor. Red Deer is 21st on this list.
That being the case,
Who stand to gain what and who stand to lose what?
If the U.S. imposes a 250% tariff on Canadian dairy products, the winners and losers would be distributed as follows:
Who Stands to Gain?
- U.S. Dairy Producers:
- American dairy farmers and producers could benefit from reduced competition, as Canadian dairy imports would become prohibitively expensive. This could lead to increased market share and higher prices for U.S. dairy products.
- Non-Canadian Dairy Exporters:
- Other countries exporting dairy to the U.S. (e.g., New Zealand, the EU) might gain market access as Canadian products are priced out of the market.
- U.S. Politicians Supporting Protectionism:
- Politicians advocating for “America First” policies could gain political support from domestic industries and workers benefiting from the tariffs.
Who Stands to Lose?
- Canadian Dairy Farmers:
- Canadian dairy producers would lose a significant portion of their export market to the U.S., leading to financial losses and potential job cuts in the industry.
- U.S. Consumers:
- American consumers could face higher prices for dairy products due to reduced competition and potential shortages. This would disproportionately affect lower-income households.
- U.S. Businesses Using Canadian Dairy:
- U.S. companies that rely on Canadian dairy imports (e.g., cheese manufacturers) would face higher costs, potentially leading to reduced profits or price increases for their products.
- Canadian Economy:
- Canadaās economy could suffer from reduced trade revenue, particularly in regions heavily dependent on dairy farming. This could also strain Canada-U.S. trade relations, impacting other sectors.
- Global Trade Stability:
- The move could undermine global trade norms, leading to uncertainty and potential retaliation from other trading partners, harming the broader international trade system.
Neutral or Mixed Outcomes
- Other U.S. Agricultural Sectors:
- While U.S. dairy might benefit, other U.S. agricultural sectors (e.g., soybeans, pork) could face retaliation from Canada, leading to losses in those industries.
- Trade Negotiations:
- The tariffs could be used as leverage in future trade negotiations, but they could also harden Canadaās stance, making agreements more difficult to reach.
Summary
- Winners: U.S. dairy producers, non-Canadian dairy exporters, and protectionist politicians.
- Losers: Canadian dairy farmers, U.S. consumers, U.S. businesses reliant on Canadian dairy, and the broader Canadian economy.
- Long-Term Risks: Escalating trade wars, strained diplomatic relations, and potential harm to the global trading system.
That said,
What’s the best possible solution?
The best possible solution to avoid the negative consequences of imposing high tariffs on Canadian dairy products would involve a combination of diplomacy, negotiation, and mutually beneficial trade policies. Here’s a roadmap for resolving the issue:
1. Negotiate a Bilateral Trade Agreement
- Expand USMCA (U.S.-Mexico-Canada Agreement): The USMCA already governs trade between the U.S., Canada, and Mexico. Both countries could negotiate additional provisions to address dairy trade imbalances without resorting to extreme tariffs.
- Quota Adjustments: The U.S. could seek increased access to Canadaās protected dairy market in exchange for maintaining reasonable tariffs on Canadian dairy exports.
2. Address Domestic Concerns Without Tariffs
- Subsidies for U.S. Dairy Farmers: Instead of tariffs, the U.S. government could provide targeted subsidies or financial support to American dairy farmers to help them compete more effectively.
- Invest in Innovation: Encourage U.S. dairy producers to innovate and improve efficiency, making them more competitive in the global market.
3. Foster Collaboration on Shared Goals
- Joint Agricultural Initiatives: The U.S. and Canada could collaborate on research and development in agriculture, focusing on sustainable farming practices and improving productivity.
- Supply Chain Integration: Strengthen cross-border supply chains to reduce costs and improve efficiency for both countries.
4. Avoid Retaliation and Escalation
- Mutual Tariff Reductions: Both countries could agree to reduce or eliminate tariffs on certain goods, fostering a more cooperative trade relationship.
- Dispute Resolution Mechanisms: Use existing frameworks like the USMCAās dispute resolution process to address grievances rather than unilaterally imposing tariffs.
5. Focus on Broader Economic Benefits
- Diversify Trade: Both countries could explore opportunities to expand trade in other sectors, reducing reliance on contentious industries like dairy.
- Consumer-Centric Policies: Prioritize policies that benefit consumers in both countries, such as ensuring stable prices and supply for dairy products.
6. Engage Stakeholders
- Consult Industry Leaders: Work with dairy industry representatives from both countries to find solutions that balance the interests of producers, businesses, and consumers.
- Public Awareness: Educate the public on the importance of maintaining strong trade relationships and the risks of protectionist policies.
Why This Approach Works
- Win-Win Outcome: Both countries benefit from stable trade relations, economic growth, and consumer satisfaction.
- Avoids Trade Wars: Prevents retaliatory tariffs and broader economic damage.
- Strengthens Alliances: Reinforces the U.S.-Canada relationship, which is critical for North American economic and geopolitical stability.
Conclusion
The best solution is to prioritize cooperation over confrontation. By negotiating mutually beneficial agreements, addressing domestic concerns without harming trade partners, and fostering collaboration, the U.S. and Canada can resolve the dairy trade issue while strengthening their broader economic relationship.
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