Canada will levy 25 per cent on American cheese and 50 per cent on whey, casein and milk powders from September 8, closing a loop that began with a July proclamation in Washington. The supply management fight that CUSMA was supposed to settle is back at the centre of the North American trade relationship.
OTTAWA, August 29, 2026. Beginning at 12:01 a.m. on Tuesday, September 8, Canada will apply a 25 per cent duty to a range of cheeses imported from the United States and a 50 per cent duty to a range of whey, casein, milk and other dairy products, according to the Department of Finance.
The measures form part of a broader counter-tariff package covering $27.6 billion in American imports across steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics. They are a direct answer to United States duties of 50 per cent that took effect on Canadian dairy and other goods on August 22, after three weeks of intensive negotiation collapsed on Friday, August 21.
The dairy lines are the most politically loaded portion of the package. They sit on top of a dispute over Canadian supply management and tariff rate quota administration that predates the current escalation by years, that CUSMA was drafted to resolve, and that has now produced tariffs running in both directions across a border where dairy trade has roughly doubled in value since 2019.
The measures
Canada’s counter-tariffs are structured to mirror the American rates product by product. The Department of Finance set three tiers, at 15, 25 and 50 per cent, drawn from the goods targeted by United States Section 338 and Section 232 tariffs, with each Canadian rate matching the corresponding American rate on the equivalent product.
On the dairy side, that translates into a 25 per cent duty on a variety of American cheeses and a 50 per cent duty on whey products, casein, milk and other dairy items, according to Finance Canada figures reported by Cheese Reporter. The department’s quick facts confirm that goods subject to the 25 per cent rate include appliances, dairy products such as cheese, and certain steel and aluminum derivative products, while the 50 per cent tier captures steel and aluminum products previously carrying a 25 per cent counter-tariff, along with furniture, clothing and apparel.
The American measures they answer are broader in the dairy category than is generally appreciated. From August 22, the United States applied 50 per cent duties to numerous Canadian dairy imports including various whey products, milk protein concentrates, lactose, casein and caseinates, and various milk powders. Cheese, butter, yogurt, fluid milk and cream, sour cream and ice cream were exempted from the additional American duties.
The asymmetry is worth noting. Washington taxed Canadian dairy ingredients and spared Canadian finished dairy products. Ottawa is taxing American finished cheese at 25 per cent and American dairy ingredients at 50 per cent. The two schedules are matched by rate rather than by product category, which means the practical effect on each side’s industry differs considerably.
How the countries got here
The proximate chain of events is short and well documented.
Last month, President Donald Trump issued a proclamation imposing additional duties of 50 per cent on certain dairy imports from Canada, originally slated to take effect on August 19, 2026. With negotiators still at the table, Trump issued a further proclamation on August 18 delaying the dairy and other additional duties by three days, to August 22.
Talks broke down on Friday, August 21. The American duties took effect the following day. On Tuesday, August 25, Champagne announced Canada’s matching response, and the government subsequently adjusted the tariff-item list twice, removing roughly 250 fish and seafood lines on August 27 and adding copper wire, wood charcoal, glass containers, plaster articles and printed photographs on August 28 to preserve the dollar-for-dollar total.
The underlying dispute is considerably older. The Canada-United States-Mexico Agreement, known as CUSMA in Canada and USMCA in the United States, obliged Canada to open a series of tariff rate quotas for American dairy products. American industry has argued for years that Canada’s administration of those quotas, in particular the allocation of quota to processors who have limited commercial incentive to fill it, has prevented the market access the agreement promised from materializing. Canada has maintained that it is in compliance with what it negotiated and agreed.
That argument has been litigated, arbitrated and negotiated without resolution. It is now being conducted through tariffs.
The trade numbers
The commercial stakes have grown substantially, which is part of why the dispute has become harder rather than easier to settle.
The value of American dairy exports to Canada rose from $728 million in 2019 to $1.3 billion in 2025, according to figures compiled by Cheese Reporter. American dairy imports from Canada rose over the same period from $195 million to $433 million. The trade balance in dairy runs roughly three to one in the United States’ favour by value.
Cheese specifically shows the same pattern. American cheese exports to Canada climbed from 19.3 million pounds in 2019 to 51.4 million pounds in 2025, while American cheese imports from Canada rose from 10.3 million pounds to 19.4 million pounds over the same six years.
The first half of 2026 shows early softening on the American side. United States dairy exports to Canada were valued at $652.5 million in the first six months of the year, down 4 per cent from the same period in 2025. American dairy imports from Canada were valued at $235.2 million, up 9 per cent year over year.
Those first-half figures predate the current tariffs entirely. The September 8 duties will be layered onto a trade flow that was already losing momentum in one direction.
Reactions in Washington and the American industry
American dairy groups have backed the tariff approach without qualification, framing it as overdue enforcement rather than escalation.
Krysta Harden, president and chief executive of the United States Dairy Export Council, was unequivocal after the American duties took effect. “We appreciate the administration’s persistence in standing up for American dairy producers and exporters who have waited far too long for Canada to live up to its promises,” she said. “Canada has had plenty of chances to fix its unfair market access practices and close the loopholes it’s used to dodge its dairy commitments under USMCA. This weekend’s action makes clear that patience has run out.”
Gregg Doud, president and chief executive of the National Milk Producers Federation, made a similar case while warning explicitly against Canadian retaliation. “This action sends an unmistakable message that Canada’s ongoing disregard for its USMCA dairy commitments carries real consequences,” he said. “It’s time for Canada to stop looking for workarounds and instead sit down in good faith to resolve these outstanding USMCA dairy implementation issues. Canadian retaliation would only serve to force the United States’ hand in escalating its leverage. The objective should be for both our countries to prevent increased friction and build on the progress made through weeks of negotiations.”
Shawna Morris, executive vice president for trade policy and global affairs at NMPF, told Civil Eats that the organizations were “disappointed” by the Canadian retaliation but continued to believe the pressure was necessary. “USDEC would like to see both parties come back to the table to pick discussions up again and find a way forward to resolve these issues,” Morris said. “There was a lot of progress made over the past several weeks and we’re hopeful that the two governments will be able to resolve the current impasse.”
Broader American agriculture has been less enthusiastic. Zippy Duvall, president of the American Farm Bureau Federation, urged both capitals back to the table. “We strongly urge the U.S. and Canada to return to the negotiating table and find a resolution,” he said. “Our strong agreements with Canada and Mexico have eliminated nearly all tariffs for U.S. agriculture, allowing the majority of our farm products to enter those markets duty- and quota-free. Additional tariff escalations and subsequent retaliation will hurt U.S. agriculture at a time when farmers and ranchers are already struggling.”
Reactions in Canada
Canadian dairy organizations have taken a defensive posture, arguing that the sector is being used as leverage in a dispute where the underlying trade balance already favours the United States.
Mathieu Frigon, president and chief executive of the Dairy Processors Association of Canada, made the balance-of-trade point directly. “The trade relationship in dairy already massively favors the United States,” he said. “Canada’s dairy processing sector is a major employer in communities across Canada, and our dairy industry depends on predictable, rules-based trade with our largest trading partner.”
David Wiens, president of Dairy Farmers of Canada, tied the issue to food sovereignty rather than to trade arithmetic. “Canadians are understandably worried about the impact of U.S. trade disruptions and the impact it could have on their lives,” he said. “It is also clear that Canadians believe in the importance of having control over our food supply and ensuring that Canada’s strong domestic dairy sector is not compromised.” He added: “We won’t apologize for wanting a strong Canadian dairy sector that ensures a reliable supply of milk from Canadian farms, produced to Canadian standards while contributing to Canada’s economy and the vitality of its rural communities.”
Both organizations said they were disappointed to see dairy drawn into a broader trade dispute when, in their view, Canada continues to uphold the commitments it negotiated under CUSMA.
The Canadian Federation of Agriculture, which represents more than 190,000 family farms, took a wider view. Its president, Keith Currie, warned about the integrated nature of the North American food system rather than about dairy specifically. “For generations, Canadian and American farmers and agri-businesses have worked as partners, supplying food, feed, fertilizer, equipment, and other essential inputs that support a strong North American food system,” he said. “The breakdown in negotiations and escalation of new tariffs create uncertainty at a time when farmers are already facing significant challenges, including rising input costs, market volatility, and increasingly unpredictable weather.”
The CFA said it was concerned that escalating tariffs would disrupt established supply chains, increase costs, reduce food affordability and undermine the competitiveness of farmers and agriculture businesses on both sides of the border.
Economic impact
The direct fiscal effect of the dairy counter-tariffs is modest against the size of either economy. American dairy exports to Canada of roughly $1.3 billion in 2025 represent a small fraction of a bilateral goods relationship measured in the hundreds of billions. The dairy component of Canada’s $27.6 billion counter-tariff package is smaller still as a share of the whole.
The effects that matter are concentrated and structural rather than aggregate.
For Canadian food manufacturers, the 50 per cent duty on whey, casein and milk powders is an input cost. Whey protein and milk protein concentrates are ingredients in processed foods, bakery goods, infant formula, sports nutrition products and animal feed. Canadian producers using American-origin dairy proteins face either a substantial duty increase, a switch to domestic or third-country supply where that is feasible, or a remission application. Domestic substitution is constrained by the structure of Canadian supply management, which sets production against domestic demand and does not carry the surplus ingredient capacity that the American system generates.
For Canadian cheese importers, distributors and food service operators, a 25 per cent duty on American cheese is a straightforward cost pass-through problem. American cheese has become a meaningful presence in Canadian food service and private label retail over the past six years, as the growth from 19.3 million to 51.4 million pounds shows. Some of that volume will shift to Canadian, European or New Zealand supply. Some will simply cost more.
For Canadian dairy farmers, the counter-tariffs are protective in intent and in effect. The Department of Finance stated the objective plainly: the primary purpose of the counter-tariffs is to put Canadian workers, producers and manufacturers harmed by American tariffs on a better competitive standing against American products in the Canadian market. A 25 per cent wedge on imported cheese and a 50 per cent wedge on imported dairy ingredients strengthens the domestic position of Canadian milk.
For Canadian dairy processors, the picture is mixed in a way that the sector’s own statements reflect. Processors benefit from a more protected domestic market for finished product and are penalized on imported ingredients. DPAC’s emphasis on “predictable, rules-based trade” rather than on the protective benefit is a reasonable indication of where the association thinks the net lands.
Business groups responding to the broader package expressed concern that the combination of retaliatory tariffs and the American duties they answer will raise input costs even for companies the measures are designed to protect. That is the central tension in any retaliation package and it applies with particular force in dairy, where the ingredient trade and the finished product trade run in the same direction.
What importers and exporters should do
The compliance requirements for the dairy lines are the same as for the rest of the September 8 package, and the timeline is short.
Verify origin under the CUSMA marking rules. The counter-tariffs apply only to goods that qualify to be marked as goods of the United States under the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations. Dairy ingredients blended or further processed in the United States from third-country inputs require particular attention.
Watch for duty stacking. Trade compliance advisers have warned that an American-origin good that does not qualify under CUSMA can face both the Most-Favoured-Nation rate and the countermeasure duty. For dairy products already subject to over-quota tariff rates under Canada’s supply management regime, the total landed duty calculation needs to be worked carefully rather than estimated.
Classify at the tariff-item level. The Department of Finance list identifies products by Canadian tariff item, HS heading, description and applicable rate, and must be read against the Schedule to Canada’s Customs Tariff. Categories such as “cheese” and “whey” cover many distinct tariff lines carrying different treatment.
Use the in-transit exemption. Goods in transit to Canada on September 8 are not subject to the countermeasures. Importers moving dairy product across the border in the first week of September should retain shipping documentation establishing status and timing.
Apply for remission at entry, not by refund. Existing remission orders remain in place and the government intends, pending Governor in Council approval, for the new counter-tariffs to benefit from remission in line with existing relief. Finance Canada continues to accept new remission requests under the United States Remission Framework, which contemplates relief where inputs cannot be sourced domestically, a test that some Canadian users of American dairy proteins may be able to meet. Refund claims can take several months to process, so relief claimed at the time of entry is materially more valuable than relief claimed afterward.
Canadian dairy exporters selling into the United States face the mirror-image problem and fewer tools. American duties of 50 per cent on whey, milk protein concentrates, lactose, casein and milk powders took effect on August 22 with no equivalent Canadian remission mechanism available to them. Exporters in those categories should be assessing third-market options, and should note that Canada’s export-facing supports, including the Canada Strong Diversification Fund and the Regional Tariff Response Initiative, are explicitly available to tariff-affected firms.
The CUSMA question underneath
The 2026 CUSMA review sits behind all of this, and it is the reason neither side has an obvious incentive to settle the dairy file in isolation.
American industry sees dairy market access as unfinished business from the original negotiation and the review as the venue to finish it. Canadian producers see supply management as a system that successive governments of both parties have pledged to defend, and see any concession made under tariff pressure as a precedent that invites more pressure.
The result is that a dispute over tariff rate quota administration, which is a technical question with technical solutions, has been elevated into a sovereignty argument on one side and a compliance argument on the other. Tariffs are a poor instrument for resolving either.
Both American dairy organizations have called for a return to the table, and both have noted that meaningful progress was made during the weeks of negotiation before the collapse. Ottawa has said it remains willing to negotiate a fair agreement. Neither position has yet produced a date.
For Canadian businesses on either side of the dairy trade, the practical horizon is September 8, and the practical work is classification, origin verification and remission filing. The larger question of whether the CUSMA dairy dispute gets settled at the table or through successive rounds of duties will be answered on a longer timeline than any importer can plan against.