Bogus pretext for the Trump tariffs

Opinion

At first, the alleged flow of fentanyl across the Canada-U.S. border was the reason for the Trump administration’s decision to impose tough tariffs on Canadian goods and services. Now, Canada’s treatment of U.S. dairy products are the latest bogus justification for America’s trade war with Canada.

Over the past several days, U.S. President Donald Trump has repeatedly claimed that Canada is imposing tariffs of more than 200 per cent on dairy products entering Canada from the U.S. Last week, his press secretary claimed the tariffs are “almost” 300 per cent.

As was the case with fentanyl, Trump and his minions are stretching the truth beyond the breaking point. The dairy tariffs they are complaining about are set out in the Canada-U.S.-Mexico Agreement that Trump himself signed in 2018.

Under that agreement, Canada agreed to not impose any tariffs on 14 different categories of U.S. dairy products unless the flow of those specific products exceeded a certain (very high) volume. The tariffs only kick in once imports exceed the quota, and the tariff percentages have not increased since the CUSMA deal was signed.

The tariff rates for imports that exceed the various quota levels are very high, but the zero-tariff maximum is so high in each category of dairy products that the U.S. has never exceeded those quotas. As a result, it isn’t even paying the tariffs Trump is complaining about.

Trump’s claims about U.S. dairy products being shut out of the Canadian market also ignore the reality that Canada is the world’s second-largest importer of U.S. dairy products. Last year alone, Canadians imported more than $1.1 billion worth of those products from south of the border.

Beyond that, the U.S. has exactly the same quota and tariff system in place as Canada does to protect its own dairy industry. If Canadian dairy exports into that country exceed quotas levels, there are also very high tariff rates — just like in Canada. That explains why so few dairy products ship from Canada into America.

On some occasions, Trump has broadened his tariff grievances to include other Canadian agricultural products. On that issue, he is on even thinner ice.

Under both the NAFTA agreement that Trump inherited in his first term and the 2018 CUSMA deal that he signed, almost all U.S. agricultural exports into Canada cross the border tariff-free. In fact, CUSMA gave American producers even greater access to Canadian markets that are subject to supply management rules.

If U.S. dairy imports into Canada aren’t even approaching the tariff thresholds, and all other U.S. agricultural products can cross the border into Canada tariff-free, what is Trump’s real complaint? It appears to be based on an assertion by the International Dairy Foods Association, which represents the American dairy industry, that Canada has created a number of administrative barriers that prevents U.S. dairy producers from shipping even more of their products into Canada.

They allege that Canada is denying them access to the Canadian market and argue that, if those barriers weren’t in place, their export levels would approach or exceed the tariff thresholds. That would then make those exports subject to tariff rates that they claim are excessive.

The flaw in their argument is that the “administrative barriers” they are moaning about are measures that exist to protect the health of Canadians. One key issue is the use of synthetic growth hormones in dairy cattle, specifically recombinant bovine somatotropin (rBST). The use of the hormone is permitted in the U.S., but banned in Canada over concerns regarding its impact on cattle health. There are also some concerns that it may be linked to an increased incidence of breast cancer in some women.

As a result, dairy products derived from cows treated with rBST — which represents a vast percentage of American dairy cattle — are not allowed to be sold in Canada. That’s not a trade barrier, but rather a reasonable and justified public health measure.

Trump’s tariffs have nothing to do with the near non-existent flow of fentanyl from Canada to the U.S., nor with the way in which Canada treats U.S. dairy and agricultural exports. We can only imagine what new false pretext he will conjure up next.

» This column previously appeared in the Winnipeg Free Press.