Is Trump right about Canada charging 250% tariffs? | About That

Summary

The video addresses Donald Trump's claims about Canada's dairy tariffs, specifically the high rates he mentions, like 200-300%, and challenges their accuracy. It explains Canada's supply management system that controls dairy production, prices, and imports, effectively protecting the industry. The video details the tariff rate quota system, where most imports don't hit the high tariff rates. It also highlights the protectionist measures in place that limit U.S. dairy exports to Canada. Despite the critiques, the video emphasizes that dairy represents a small fraction of U.S.-Canada trade, suggesting that Trump's focus on dairy may be symbolic rather than economically significant.

Takeaways

• 😀 Trump claims that Canada imposes unfair tariffs on U.S. dairy products, with rates as high as 250%-270%.
• 😀 Canada's supply management system strictly controls dairy production, pricing, and foreign market access to protect local producers.
• 😀 The high tariffs Trump refers to only apply to imports exceeding specific quotas, meaning they don’t affect most dairy trade.
• 😀 For the past three years, the U.S. has exported more than a billion dollars worth of dairy to Canada, with little to no tariff impact.
• 😀 The tariff rates apply only when imports surpass a certain limit, after which U.S. dairy faces 200-300% tariffs, but this rarely happens.
• 😀 Canada's dairy import quotas allow a certain amount of U.S. dairy to enter tariff-free, but these quotas are often underutilized.
• 😀 The U.S. has not come close to exceeding its dairy quotas in Canada, indicating that demand for U.S. dairy is not as high as claimed.
• 😀 The low utilization of tariff-free quotas is partly because Canadian processors prefer using domestically produced dairy over imports.
• 😀 Canada's supply management system guarantees stable prices for farmers, shielding them from fluctuating market conditions.
• 😀 Critics argue that the allocation of import quotas in Canada may be manipulated to prevent U.S. exporters from fully utilizing their access.
• 😀 Despite the political debate, dairy trade represents only a small fraction of overall U.S.-Canada trade, suggesting its limited economic impact.

Q & A

What is Donald Trump’s claim about Canada’s dairy tariffs?

Donald Trump claims that Canada imposes extremely high tariffs on American dairy products, stating that tariffs can be as high as 200%, 250%, and even 270% on items like milk, yogurt, and butter.

What is Canada's supply management system in dairy production?

Canada's supply management system controls milk production, pricing, and foreign access to the dairy market. It aims to protect local farmers and ensure stable prices for dairy products by regulating the amount of milk produced and how much can be imported.

Do these high tariffs really apply to most American dairy imports?

No, these high tariffs rarely apply. Although Canada does have tariffs up to 241% on some dairy products, they only apply once imports exceed specific quota limits. Most U.S. dairy exports do not surpass these limits, so the tariffs are not triggered.

What is a tariff rate quota (TRQ) in the context of Canada’s dairy tariffs?

A tariff rate quota (TRQ) allows imports of certain dairy products at no tariff up to a specified quantity. Once that quota is exceeded, higher tariffs are applied. For example, the first three buckets of milk might enter without a tariff, but anything above that incurs high tariffs.

How much dairy does the U.S. export to Canada each year?

The U.S. exports over a billion dollars worth of dairy products to Canada each year, and Canada is the second-largest importer of American dairy, after Mexico.

Why don’t U.S. dairy exporters exceed the tariff quotas set by Canada?

U.S. dairy exporters typically don't exceed the tariff quotas because Canadian businesses, who hold the quotas, often have no incentive to import American dairy products. They prefer to use domestic products instead of importing from the U.S., making it unlikely to hit the quota limits.

Why do Canadian processors not import more U.S. dairy products despite having tariff-free quotas?

Canadian processors often produce the same dairy products that the U.S. would export, such as cheese or yogurt. Since these products are made domestically, there is little incentive to import U.S. dairy, even when tariff-free quotas are available.

How does Canada control the dairy market through supply management?

Canada controls its dairy market through strict production limits and guaranteed pricing for farmers. The system ensures that milk production matches domestic consumption and stabilizes farmer incomes, but it results in higher consumer prices compared to a more competitive market.

Is there any evidence that Canada manipulates the allocation of tariff-free import quotas?

Yes, the U.S. has argued that Canada manipulates the allocation of these quotas to limit U.S. dairy imports. For example, Canadian processors who hold tariff-free quotas may have no interest in importing U.S. dairy because they already produce similar products domestically.

Does dairy trade significantly impact the overall U.S.-Canada trade relationship?

No, dairy trade represents a very small fraction of the overall U.S.-Canada trade relationship, accounting for only 0.1% of the $700 billion in annual trade between the two countries. The dispute over dairy is more politically symbolic than economically significant.