The Trump administration’s decision this week to invoke Section 232 tariffs on Canada represents a calculated negotiating tactic designed to force the U.S. northern neighbor to finally honor its dairy trade commitments under the U.S.-Mexico-Canada Agreement, according to the head of the nation’s largest dairy producer organization.
“The simple answer to this is it’s all a negotiation,” Greg Doud, president and CEO of the National Milk Producers Federation and former chief agricultural trade negotiator for the U.S. Trade Representative’s Office, told AgriTalk host Chip Flory. “President Trump is a master at creating leverage to use in negotiations, and that’s what this is.”
The tariff move comes as USMCA faces its six-year review, and it underscores longstanding frustrations with Canada’s implementation of dairy market access provisions that were supposed to benefit U.S. producers.
The canadian dairy problem
At the heart of the dispute is how Canada administers its tariff-rate quotas (TRQs) for dairy products — a system Doud described as “unique” in the world.
Under USMCA, Canada agreed to allow a certain quantity of American dairy products to enter at zero tariff. Once that quota is filled, tariffs increase significantly to protect Canadian producers. It’s a standard trade mechanism used globally.
What makes Canada different, Doud explained, is how it allocates those quota rights.
“What Canada does in dairy is unique, I think, to anywhere else in the world, where they allocate that TRQ to entities in Canada who have no interest in using it,” Doud said. “The Canadian line is very clever: ‘Well, you know, why do you want an increase in the quantity of the tariff rate quota when you’re not even using what you have now?’ Well, no, we’re not using it because you’re intentionally giving it to people in Canada that have no intention, have no need, no desire to import dairy products from the U.S.”
The practice effectively nullifies the market access that American negotiators secured during USMCA talks — and Canada knows it, according to Doud.
“That’s not what was negotiated in USMCA. They clearly know that, but they persist,” he said. “In fact, they persist to a point where a couple years ago they passed a law, a federal law in Canada, that prohibits their negotiators from increasing the size of the quantity of the tariff rate quota. I know of no one in the history of the world that’s ever done anything like that in a trade agreement. That’s really, really remarkable.”
What the U.S. wants
U.S. dairy producers aren’t asking Canada to expand the quota — they simply want Canada to allocate the existing quota to entities that will actually use it.
“We’re not asking them for an increase in the quantity,” Doud clarified. “We’re just asking them to implement it the way it was supposed to be implemented, and they know that.”
The issue has been a persistent irritant since USMCA took effect. Doud noted that during the first Trump administration, U.S. Trade Representative Robert Lighthizer was “really well versed on this and really dug in and understood what Canada was doing.”
“President Trump knows — it was explained to him back then what they were doing,” Doud said. “I don’t know that he can explain it now, other than the fact that he knows that we’re being wronged by Canada there. He just knows that.”
Doud predicted the dairy dispute will likely escalate to top political levels before it’s resolved. “This is very politically sensitive in Canada,” he said. “This is a conversation that’ll probably go right to the top.”
USMCA review: Mexico versus Canada
While Canada presents challenges, Doud painted a starkly different picture of U.S.-Mexico agricultural trade relations.
“Our trading relationship in ag between the U.S. and Mexico is tremendous,” he said. “The deal we did with USMCA is still the gold standard agreement that we use just about with every other country in the world today.”
Mexico is America’s number one dairy export market, with Canada ranking second. “It isn’t that we have a terrible trading relationship,” Doud noted. “It’s just the fact that we have a few flies in the ointment we’ve got to get sorted out.”
Most issues with Mexico under USMCA aren’t agricultural, Doud said. Instead, they center on Chinese companies operating in Mexico to circumvent U.S. tariffs — a problem he believes Mexican officials recognize needs addressing.
China engagement resumes
Doud expressed cautious optimism about renewed agricultural trade engagement with China through the recently established U.S.-China Board of Trade Council.
“It’s an enhanced level of engagement and conversation and discussion between us and China,” he explained. The goal is regular check-ins on trade performance and identifying areas where tariffs might need adjustment.
He noted that Chinese President Xi Jinping’s upcoming visit to Washington on Sept. 24 will likely include agricultural trade announcements. “He will come bearing gifts,” Doud predicted. “There will be some stuff going on in agricultural trade between the U.S. and China.”
The renewed engagement stands in sharp contrast to the previous four years, according to Doud.
“What we had for four years in the Biden administration was not one single conversation on ag trade between the U.S. and China — not one,” he said. “If you’re buying fertilizer from somebody, and for four years they don’t return your phone calls, are you going to stay with them? You’re going somewhere else. The situation we’re in with China and ag trade is on us. We’ve kind of blown it here.”
Brazil Tariffs Target Non-Ag Products
Regarding the 25% Section 301 tariffs on Brazil that took effect this week, Doud said agricultural products — including beef, coffee and orange juice — have been largely exempted.
On beef specifically, he noted that a longstanding WTO-negotiated tariff rate quota has existed since 1994. Once Brazil fills its quota each year — which typically happens within weeks — beef imports already face a 26.4% tariff.
The bigger picture
Doud’s recent appearance in Iowa with his former boss, Ambassador Lighthizer, underscored the continued focus on trade policy among key Trump administration alumni.
“Bob is still very adamant and engaged in all this, although not in an official capacity,” Doud said, referencing Lighthizer’s argument that the U.S. needs a comprehensive approach to counter other countries’ attempts to “game” American monetary, fiscal, trade, regulatory and tax policies.
“What we need is just a little bit of tariff” to level the playing field, Doud said, summarizing Lighthizer’s position.
As USMCA’s review process continues, dairy trade with Canada remains a test case for whether the agreement’s promises will translate into real market access—or whether creative noncompliance will be tolerated by America’s trading partners.
For now, the Trump administration appears determined not to let the issue slide, using tariff threats as leverage to force Canada to honor the spirit, not just the letter, of its USMCA commitments.
“We don’t give up on stuff like this,” Doud said. “We’re not rolling over. This has to be fixed.”
To listen to the full conversation between Flory and Doud, go to: AgriTalk-7-23-26-Amb Gregg Doud - AgriTalk - Omny.fm
